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Importance of Savings and Investments

importance of savings and investments

IMPORTANCE OF SAVINGS AND INVESTMENTS

Why people should save and invest despite financial struggles.

 
Importance of Savings and Investments

The Importance of Savings and Investments

The first thing we Filipino should learn about money is that we should change our mindset when it comes to money, a lot of people say these things “I do not have good income”, “the money that comes in is not even enough to sustain our needs” etc. The right mindset should be income minus savings is equivalent to what expense, most people usually do is income minus expenditures and then that’s the time they save. Savings should be a priority and then what is left should be for spending.

Would you agree, how we were raised when we were young directly affects how we look at money? That’s why it is very important that at the very early age we should teach our child on how to handle money responsibly. You may be interested in my post about savings & kids.

[ TO KNOW MORE ABOUT SAVINGS ACCOUNT FOR KIDS CLICK HERE ]

If you are familiar with Chinky Tan, he shared in one of his interviews how he was raised by his parents. He said he was taught about 50-25-25.

50% – for savings
25% – to start a business to make your money grow
25% – the only thing you can spend

So imagine with every peso that he used to earn when he was young, 50 cents goes to savings, 25 cents for making it grow and 25 for spending so imagine if a candy costs Php1, it only means that he has to earn 4 pesos in order to buy one.

If our current lifestyle right now is Php100,000 we need to earn Php400,000.

If this cannot be applied to us or too impossible for us to follow, maybe we can copy the principle. We can adjust the percentage capacity even as little as 5% or 10% because what important is for us to develop a habit, YES, DISCIPLINE! We should learn to embrace the importance of savings and investments.

There will come a time when we are going to get old. We will not have the capacity to work, the moment we stop working is the moment we stop earning but the big problem is we do not stop spending! When something bad happens to us there is a possibility that all our savings could disappear so a consistent source of cash flow is important. The point is, if we want to retire comfortably we should know how to make our money grow but we should learn first how to save.

Let us ask ourselves especially the breadwinners, just in case something happen to you what would you do? What is your fallback? Example, the mother is a plain housewife and the father is the breadwinner, can the mother perform what the husband is doing or can earn what her husband is earning? If the answer is no! then it will be a disaster. What we should do is have an Income Replacement Fund, an assurance for the family just in case something bad happens to the breadwinner the income can continuously come in or that there will be a continues cash flow. So, for example, your monthly expenses is Php 50,000 multiply it to 12 (12 months) so that’s Php600,000 so usually what you need is to add zero at the end of the total, it will now be 6 million (Php6,000,000). That’s what your family should inherit or have. This is different from Emergency Fund.

[ TO KNOW MORE ABOUT EMERGENCY FUND CLICK HERE ]

If you think of it, you will literally see the beauty of Investment, Investment really is the key. Where should we invest? How should we invest? There are plenty of scams around and we should always keep in mind these following rules when it comes to investment.

The Importance of Savings and Investments: The Rules in Investment

Investment Rule Number 1 – never invest in something that you do not understand no matter how profitable it may be. Ignorance is the number one killer when it comes to investment.

Investment Rule Number 2 – never invest out of greed!

Investment Rule Number 3– never invest based on the function of trust! Sad to say but this is true, the more money you have the more people suddenly know you. When you retire and get your retirement fund people or relatives come to you and asks where will you put your money? People might entice you to invest in a high yielding interest.

This is what normally happens, for example, a person has 2 million pesos and somebody offered him a big return on investment which is 5% interest per month 60% per year. Let say he puts 1 million, he’ll get the 5% monthly which is Php50,000 a month x 12 months so that is Php 600,000 a year, let’s say every month the check goes ok, so after one year if you are the investor will you pull out or will you continue? You’ll continue it right? Because you are getting Php50,000.00 without doing anything, then once you invest the next million that will be the end of the story. Scammers know how to play with your emotions, the Php600,000 returned was actually your money. When greed comes in logic goes out!

The Importance of Savings and Investments

The Importance of Savings and Investments
Importance of Savings and Investments was last modified: June 4th, 2018 by Joyful Mommy

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* A proud mommy * Full time mom * part time web project manager * fond reader of web forums especially about parenting * loves to share useful information * loves her daughter and husband * happy individual * God Bless everyone!

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