Just like most Filipinos, I was taught to save money in the bank. But as I grew up and learned more about interest rates, I’ve learned that the bank actually is one of the worst places to put your money!
Today, I’m going to share my real-hand experience, and how I realized that the bank shouldn’t be the only place where I put all of my money.
But first of all, let me clear one thing. I’m not saying that you shouldn’t put money in the bank, I’m just saying that you shouldn’t put ALL of your money in the bank. First of all, it isn’t wise to put all of your eggs in one basket. Remember, when BPI had this system problem, and almost all of the users’ balance was affected?
I do. Naging ₱ – 2000 pa nga ung account ko although may laman siya before the incident happened. And worst of all, people were allowed to withdraw at that time. Just imagine, paano yung mga taong hindi sapat yung pera sa wallet and only depends on their ATM for cash. Not only that, imagine yung reaksyon ng mga taong nilagay ung lifetime savings nila then after checking online, naglaho bigla.
Well, the good thing is it got fixed. But just imagine, if it didn’t. Saan ka pupulutin?
This is why you have to diversify. Wag lang iisang bank account, mga beshy. If possible, mag open ng another account sa ibang banks. This way if sakaling online yung main bank mo, you can always withdraw money from the bank.
Yes, people, that’s the keyword “diversify.”
Another thing is that banks are a great place to place your emergency fund. If you guys remember, emergency fund refers to your savings allotted for emergency uses. That’s why you have to put your emergency fund in the form of a debit (ATM) savings account so it will be easy for you to withdraw money anytime and anywhere.
BUT IF YOU’RE THINKING OF SAVING YOUR RETIREMENT FUND ON THE BANK, THEN YOU’RE MAKING A BIG MISTAKE!
Why? It’s because banks actually offer the lowest interest rates in the market. Let’s take my savings account for example.
I have a BPI Debit Mastercard Savings Account, the usual ATM debit savings account that most of us have. It has a maintaining balance of ₱ 3,000 and has an interest rate of 0.250% per annum (per year). But for your money to earn this interest rate, it should reach a balance of ₱5,000.
That means that if you have ₱ 5,000 on your bank account right now and will keep it for the whole year, it would likely earn ₱ 125 by the end of the year. Yes, it’s that small. But that’s not always the case, especially if you can deposit a larger amount of money in the bank.
So let’s go bank to my savings account. Back in March 2019, I deposited ₱ 100,000 in BPI Debit Mastercard Savings Account. And do you know, how much I earn by the end of the month? I actually earned ₱ 100.
That meant that if I kept my ₱ 100,000 for a whole year, it would earn ₱ 1,200.
But if I tell you that my money can actually earn 4% per annum? Yes, instead of earning ₱ 1,200, I could instead earn ₱ 4,000 in a year by just placing my money in a different kind of investment. And the best about it is the 4% interest per annum can even grow to 10% per annum. That means my ₱ 100,000 can actually earn ₱ 10,000 in a year, depending on the market.
This is the reason why I got myself a VUL plan because I want my retirement fund to grow rather than just remain stagnant in the bank, earning as little as .25% or 2% max. Let’s face it, inflation is real! Sabi nga nila, ang dating ₱ 50, ₱20 na lang ngayon.
I got my first VUL plan from Sun Life called Sun Maxilink Prime when I was 20 years old. It is a 10-years to pay variable-unit linked policy that offers a life insurance plan with investment components and other living benefits.
My plan includes the following benefits:
₱ 700,000 death benefit
A lump sum amount that my beneficiaries (family) will get if I die.
₱ 350,000 accidental dismemberment, disability, and death benefit
If I die due to an accident, this amount will be added into my lump sum death benefit. That means my family can get ₱ 1,050,000.
If I became disabled due to disease or accident, I’d automatically get this amount as a lump sum.
If ever I lost a part of my body due to an accident, depending on which body part it is, I’ll be able to get a percentage of this amount. For example, if I lost one of my arms, I’ll be able to get 50% of this amount — a total of ₱175,000.
₱ 350,000 total waiver of disability benefit
If I ever became disabled during my 10-year payment, the amount on this benefit will be the one to pay my insurance policy so it won’t lapse or be terminated.
₱ 700 hospital income benefit (₱ 700 x 1000 = ₱ 700,000)
If I get confined in the hospital for 3 days due to illness or accident, I’ll be getting ₱ 700 per each day I spend in the hospital. This amount can be doubled if ever I was confined due to a terminal illness.
It has an allowance of 1000 days.
₱ 5,293,421 projected fund value (investment fund) at 10% growth by 65 years old
This is the retirement fund I can withdraw by the time I reach 65 years old.
And yes, I get to have all of these benefits by just paying ₱ 1,500 per month for 10 years.
So why is this a wise decision? Well, let’s get mathematical.
If I’m paying ₱ 1,500 per month for 10 years, that means I’ll be spending ₱ 180,000. If I compute all the benefits I’m getting from my Sun Maxilink Prime VUL plan are as follows:
₱ 700,000 – Death Benefit
₱ 350,000 – Accidental Death, Disability, and Dismemberment Benefit
₱ 350,000 – Total Waiver of Disability
₱ 700,000 – Health Income Benefit (₱ 700 x 1000 days)
= ₱ 21,000,000
This doesn’t yet include the ₱ 5,293,421 investment fund value I can get when I reached 65 years old. If I added that amount to ₱ 21,000,000, the total sum amount I’ll be getting is ₱ 26,293,421.
But what if I chose saving ₱ 1,500 each month for 10 years (a total of ₱ 180,000 at 30 years old), and decided to put it in the bank. With an interest of .25% per annum, I’ll be getting ₱ 450. By the time I reached 65 years old and decided to withdraw it, the total amount of money I’ll be getting is just ₱ 195,750. That means the money I only earned for 35 years is ₱15,750.
Just imagine the difference between those amounts.
So before you think that the bank is the best place to save your money for your retirement fund, then better think again.
If you want to know more about VUL and how you can further grow your money, don’t hesitate to email me at firstname.lastname@example.org or call me via phone at 09194872581.