According to the Bangko Sentral ng Pilipinas, only 35% of Filipinos who opened new bank accounts in 2019 did so in order to save money, while the remaining 65% opened bank accounts for their payroll, remittances, and day to day spending. Setting aside a portion of your income regularly is a key step to achieving financial freedom regardless if you want to meet long term or short term goals.
While it’s easy to identify the reason why you should start a frugal lifestyle, setting actual goals can be quite tricky. Here’s a guide to help identify how much you should save based on your goals.
1. Saving for an emergency
Recent events have become valuable lessons for everyone to start saving for a rainy day. Unfortunately, only 40% of Filipino bank account holders use their accounts for this specific purpose. An emergency fund can help lessen any impact to our personal financial management in case a medical emergency arises or if you experience a temporary loss of income.
What is the ideal emergency fund amount? It is recommended that you have a sum of at least three to six months of your current monthly income for an emergency fund. However, there are a few factors that may affect your target goal. You must also take into consideration the amount of money you can comfortably set aside, how much money can provide you a sense of stability, and your current expenses.
Once you’ve taken all of these into account, you can start calculating the amount of money you have to save for your emergency fund. Set a reasonable timeline on how long you should be saving. Avoid putting too much pressure on yourself by setting your goal amount too high or your timeline too short.
2. Saving for a home
Acquiring real estate is a big financial step mainly because of the costs that come with it. Despite this, getting a home will always be a good investment as properties tend to appreciate in value easily. Before jumping into a real estate investment, you must first identify your current financial footing to see how much money you must save.
The 2.5 rule is a good guide to follow when identifying how much you can spend on real property. Following this rule, you must take note of your monthly take home pay. Then, compute for your annual income while taking into account your 13th month pay. Multiply your annual income by 2.5 and you’ll arrive with the number you can spend for a house. Anything more than this may be too risky so make sure to consider this rule when buying a home.
3. Saving for retirement
Statistics show that saving for retirement is not a priority for most Filipinos. In fact, 84% of Filipinos plan to continue working past their retirement. Getting a job during your senior years may not guarantee the same level of income as that of younger employees. And while government mandated benefits such as SSS and GSIS are available, they cannot cover all your expenses after retirement.
Saving for retirement should start as soon as possible. Those who start as early as their 20s can set aside at least 10% to 15% of their income if they plan to retire by 70. This amount can rise up to 24% when you start saving for retirement in your 40s and 50% in your 50s.
Luckily, you don’t have to be alone when saving to reach your life goals. With CIMB Bank, your savings get a boost with our best-in-market interest rates. You can getup to 4% p.a. interest on your savings in two ways. To enjoy this rate, you can either increase your Average Daily Balance (ADB) by P1,000 each month or you can maintain a minimum balance of P100,000 on your UpSave or GSave account. PLUS, you can get Life Insurance coverage for free.
Make the smart choice and reach your life goals with CIMB Bank. Download the app and open an UpSave account now!