5 Types of Savings for Every Filipino

5 Types of Savings for Every Filipino – and Where to Keep Them

1 – Day-to-Day

This isn’t technically ‘savings’ for Filipino, but it is important to have a dedicated ATM savings account for easy access to your cash for daily transactions.

Here you can receive your monthly salary, pay your credit card and bills, and make ATM withdrawals for your daily spending.

Any surplus should be placed in another basket. Force yourself in a state of scarcity. If money is too easily accessible, it would be easy to spend too. (Read: How to be Frugal)

Set up circuit breakers. For example, if you do get sudden windfall: an annual bonus, a sales commission, a tax refund, an inheritance, put it away immediately in other savings in order to avoid spending it carelessly on impulsive purchases.

2 – Emergency Fund

Emergency funds cover for the unexpected: COVID-19, medical emergencies, unemployment, calamities, disasters, market, crisis, home repairs, major car fixes, etc.

As early as you can, set up your emergency fund by setting up a separate bank account. This is cash you should put away in case of emergencies.

The pandemic we all know now as COVID-19. It breaks my heart to see a lot of my friends on FB regret not setting an emergency fund before the enforced lockdown happened.

The textbook figure for an emergency fund is 6 to 9 months of salary, depending on how good you are at avoiding emergencies. If you’re single, healthy and employed, this is a good standard. However, if you are married, with kids, or have other financial obligations (supporting parents, supporting relatives, etc.), keep at least 12 months emergency fund.

3 – Opportunity Fund

So many articles and literature have been written about the value of having an emergency fund. However, have you ever thought about setting up an opportunity fund?

While the emergency fund helps you and your family keep afloat in your living expenses in times of emergency or crisis, the opportunity fund is for unlocking investment opportunities. The opportunity fund should be separate from your emergency fund.

There are plenty of opportunities during crises: undervalued businesses that are forced to sell because of depleted cash flows, foreclosed properties or discounted real estate, shares of stocks, funds, securities, and more.

When investing during a crisis, cash is king. Now is not the time to empty your emergency fund, to take a loan or second mortgage your home to invest in an ‘opportunity of a lifetime’.

Read: Investing and Earning during a Crisis

Even without crises, it is good practice to set aside another savings account for investment and reinvestment purposes. and opportunities.

4 – Short Term Savings

⁠Having an account to accomplish short-term goals protects your other funds from being touched.

Savings for the short-term plans, such as plans for an upcoming holiday to Bali, John Legend Concert, new gadget, or Christmas presents.

If you have ‘more ambitious’ short-term goals but not quite as long-term, e.g. a future wedding or planning to purchase a car or condo (mid-term goals?), you may place it in a separate account.

5 – Long Term Savings

Set aside savings for the long-term future; funds separate from your emergency fund. Make different nest eggs for your retirement, for your kids’ college education, dream home, etc.