We all work hard to earn and save our money. But did you know that working our 9-5 jobs and keeping savings aren’t enough to grow—or even preserve—the value of our income?
Let’s take an example: a burger meal that cost only ₱105 a few years ago is now worth ₱125. The ₱105 that you had saved at home will no longer be enough to get you the same burger today.
This is because of inflation. The prices of goods rise 3 to 4% every year, but our income doesn’t always rise alongside it. As a result, the purchasing power of our money consistently goes down. It’s been eating away at our savings for years.
So… how can we beat inflation?
If you keep most of your funds in cash, you’re losing money every year. Keeping them in a traditional savings account isn’t much better, since the common interest rate of 0.25% is still lower than the rate of inflation.
The key to beating inflation is to consistently grow your money. You’ll need to create more active revenue streams or invest your funds in instruments that have a higher potential return than 3 to 4%. Here are a few ways to do it:
1. Save smart
Open a high-yield savings account. Because interest rates are right around the rate of yearly inflation, these accounts are your best bet for capital preservation. Your money is also accessible in case the unforeseen happens, making them ideal for storing your emergency fund.
High-yield savings accounts are offered in the Philippines by digital banks like ING, CIMB, and Komo by Eastwest. Unlike traditional banks with brick and mortar establishments, their operations are completely online. Because of this, digital banks are able to cut down on overhead costs like rental fees and electricity and pass those savings along to their consumers in the form of higher interest rates, which range from 2.5 to 5% depending on available promos.
Some of these accounts also come with perks such as cash back, free ATM cards, and even free insurance coverages. Shop around and see which option suits your needs!
You can also look into investing your money in government savings programs like PagIBIG MP2 and SSS PERA Fund. This is a great way to diversify your asset portfolio.
Government savings accounts allow your money to grow in a tax-free environment, awarding you higher returns on your investment. Based on historical performance, MP2 awards clients around 7% in dividends per year, while PERA rates vary based on your choice of investment product.
These accounts are best for holding money that you won’t need to touch for a while, or for your ‘forced savings.’ MP2 accounts have a 5-year maturity period, while PERA savings mature when you reach 55 years old. Withdrawing your funds before your account maturity may result in penalties, so don’t put in more money than you can!
2. Invest and earn dividends
Grow your money by investing. This passive income stream takes some time to build, but can massively upscale your funds. Long-term investors are able to turn thousands into millions just by investing in the right mix of products!
Investing isn’t one-size-fits all: your results will be dependent on your risk appetite. It’s true that high risk equals high reward, but ambitious investments aren’t for everyone. Scope out the market and see which investments fit your portfolio best.
For a long time, Filipinos have been intimidated by the concept of investing. The great news is that there are so many educational resources now available that help make the stock market seem less scary. To learn more about the basics of investing, you can check out the courses available on Stocks-Ed. If you’d like to practice trading with zero risk, you can try out the Investagrams app.
3. Make more money
Start that side hustle! Whether it’s starting a small business, taking on a freelance project, or even selling some of your extra items, it’s always a good idea to diversify your income streams.
Relying on one salary for income will make it hard for you to adjust when the unexpected happens. Keeping multiple income streams will give you a bit of extra wiggle room (they say most millionaires have around seven).
4. Keep learning about your finances
The economy is always changing, and new financial products come out every day. Teach yourself how to manage your money, and you’ll be equipped to make good financial decisions no matter what happens.
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