Why do people build savings?

According to US president Benjamin Franklin, walang sigurado sa mundong ito except death and taxes. In other words, hindi natin kayang i-predict ang future. No one knows kung kailan sila magkakasakit, magre-resign, o makaka-encounter ng bad luck.

All we know is, we need to be prepared for anything life throws at us. This is why we need to build savings: mahaharap natin ang anumang event without going into debt or wiping out all our assets.

Here are five more benefits of having savings.

1. Savings earn money when deposited in a savings account

Do you have a savings account? If yes, then binibigyan ka ng issuing bank ng percentage ng iyong savings annually. This is to encourage you to build savings. Ang annual percentage na ito ay tinatawag na interest rate. Ito ang easiest and most accessible way na kumita ng passive income with your money.

For example: You made an initial deposit of P100,000. Ang interest rate ng savings account mo ay 4%. Thus, you’ll earn P4,000 as interest rate by the end of Year 1.

2. Savings will prepare you for emergencies

Once in a while, we all get sudden expenses na hindi ma-delay. These can be health issues, job loss, or home repairs after natural disasters. Having an emergency fund ensures na hindi mauubos ang assets mo to survive these situations.

We recommend na unahin mong pag-ipunan ang iyong emergency fund. Also, huwag itong gamitin for flash sales or expenses na matagal nang dapat pinaghandaan! Kulang ang pang-tuition, kasal, o credit card debt? Refer to our Budgeting 101 guide to know where to cut costs o makakuha ng extra budget.

3. Savings will fund your goals

Lahat tayo ay may short-term goals, tulad ng travel, new gadgets, o upcoming events. Instead of borrowing or using a credit card, saving money for these goals ahead of time will help avoid debt.

The same applies to long-term goals, e.g. your future home o retirement fund. Many of us hope na makakuha ng malaking pera out of nowhere para matupad ang mga ito. However, it’s more realistic to build savings slowly but surely over several years to fund these goals.

4. Savings expand your options

Savings lets you control your own destiny. May freedom ka na mag-decide at pumili ng options dahil may savings ka to help you survive.

Toxic ang work environment? With savings, you can quit and restore your mental health before looking for another job. Hirap mag-commute to work? With savings, makakalipat ka sa mas convenient na location. Hindi covered ng company HMO ang health procedure mo? With savings, you can take care of your health yourself. Knowing you have these options due to savings will also be good for your peace of mind.

5. Savings will make you financially independent upon retirement

Maraming Pilipino ang hirap mag-ipon because they still support their parents. Oftentimes, retirees na ang kanilang magulang. They therefore have no other source of financial support but their children.

By saving for retirement, masisiguro mong financially independent ka hanggang sa pagtanda. Saving early also ensures na maganda ang quality of life mo after you retire. The good news is, most retirement savings accounts offer a reward para sa maagang pag-iipon: compound interest.

Let’s assume that you’ll withdraw your retirement fund by 60. Mas malaki ang maiipon mo kung magsisimula ka at 20 years old versus 30. Ito ay dahil may 10 years’ worth of compound interest ka nang naidagdag sa iyong initial deposit. For retirement funds, time is your friend.

For example: Gumawa ka ng P100,000 initial deposit on a savings account with 4% interest rate. Afterwards, you earned P4,000 as interest rate on Year 1. Therefore, may P104,000 ka nang kikita ng interest on Year 2 (instead of just your initial deposit of P100,000).

Saving is the best financial habit you can develop for a more secure future. Check out our discussion of different savings accounts to know kung alin ang bagay sa iyong habits! Or, you can skip the hassle and open a GSave savings account right now with just 1 valid ID and no minimum deposit. Anumang savings ang piliin mo, it will be a good step towards financial independence!