INTEREST RATES for COMMERCIAL BANKS

 

You can check out the latest interest rates of the following Commercial banks:

Metrobank

Bank of the Philippine Island (BPI)

Banco de Oro

Chinabank

Among the four, Chinabank offers the highest interest rates for their Time Deposit Products. If you have multi-million funds to open for a time deposit, i suggest you deal with the big commercial banks for stability. But if you’ re starting, and can conveniently chop your funds under multiple accounts and still comply with the 250K PDIC Limit (to secure your deposits), then if you’ll ask me, Rural Banks still offer far better rates than commercial banks. (i have a separate post about rural banks, though the rates may no longer be updated — but still definitely higher than commercial banks) COMMERCIAL vs. RURAL

EMERGENCY FUND

As the cliché goes… “the more money you earn, the more money you spend”

 

And for some people, they even spend more money than they earn – just to show everyone that they afford to buy the newest gadgets, the hippest clothes, and the most recent car.

 

Sad, but true, most people don’t think of the future, and would rather spend everything now as if life will shower them with endless supply of money.

 

In this very materialistic world, it is very difficult to save. Many would argue that they don’t earn much every month – so how can they even start saving, a typical life of living paycheck to paycheck.

 

I don’t necessarily agree. If you can afford to buy those gadgets and clothes, then you must be earning enough to save some of it. It just takes discipline and will power.

 

Then, trick your mind – tell yourself, “ I earn less, therefore I have to spend less”

 

If you earn 20K (after tax) per month – automatically save a portion, let’s say 5K, and set it aside where you can’t spend it unless it’s an emergency. In effect, it brings down your salary to 15K – then you have to psych yourself that you only have 15K to spend.  Do it every month, then you’ll find yourself with a substantial EMERGENCY FUND for the rainy days.

 

Emergency Fund is a 6-month to 1-year worth of your living expenses to tide you in cases of emergency, like loss of job, sickness, etc.  This should allow you to get up, and find a new job to get things back to normal. In the event that you lose your job, how can you concentrate in looking for another one, if you’ll be busy thinking where to get your family’s next meal, or how to pay for your monthly bills.

 

Set aside this emergency fund, where it can grow in time (though such money is readily available, no one would really want to be in a position where you would be forced to use your emergency fund – nobody wants to lose his job, right?). Then, you have not only saved for an emergency fund, but such amount can grow, and you can use the interest to finance your wants like to buy new gadgets, clothes, etc. or even to increase your investment portfolio. Most people keep their Emergency Fund in a separate Savings Account, which probably earns less than 1% per annum. I suggest, you find other tools, which can give better growth, but as accessible and liquid as a Savings Account. You can choose to put it in Time Deposit (most Rural Banks give higher returns than Commercial Banks), Mutual Funds, Treasury Bills, etc.

 

Only after you have achieved in saving your Emergency Fund, then you’ll be ready for the next phase – Investing.

 

If you continue your healthy habit of saving every month, you will continue to accumulate more money even after you have completed saving for your Emergency Fund. Those excess funds can now be channeled to other investment tools that can give you even higher rates of return. As they say, “the higher the risk, the higher the return”. Since these are excess funds, you can be as wild as you can in satisfying your investment appetite, anyways you still have your regular job to pay for your usual expenses, and your emergency fund just I case the worst happens.

 

 

 

 

 

 

COMMERCIAL vs. RURAL

 

Commercial Bank

 

Banking with big names like BDO, Metrobank or BPI gives you convenience, but don’t expect your money to grow. With interest rates of less than 1% for Savings and 3%-4% for Time Deposit – your interest earnings can only go as far as buying you a McDo Happy Meal. But, with 24/7 ATM, online banking, and ease in drawing checks, it is still advisable to maintain Savings and Current Accounts with Commercial Banks for convenience.

 

Bank Products you can avail:

Savings Account – good tool to fund your current account electronically

Current Account – to pay for your monthly amortization (auto loan, housing loan, etc.)

Time Deposit – to park your spare cash, and earn a little more than the 1%p.a. interest derived from Savings Account

Treasury Bills/Bonds – it will give your better yield, but minimum amount of investment may be steep for a typical employee

 

 

Rural Bank

 

If you want your money to grow with very minimal risk, avail of Time Deposits from Rural Banks (make sure the bank is PDIC insured – you can check the PDIC website). Most Rural Banks offer very competitive rates from 14% to as high as 20% per annum interest for Time Deposits (3 to 5 year placement). Most people are hesitant in dealing with Rural Banks, questioning their stability – but, there are several Rural Banks with long and credible track records – even longer than some commercial banks. Also, so long as your money is insured by PDIC (covered up to 250,000), then you should not worry. Most people I know open Time Deposits with multiple Rural Banks (max of 250,000 only per bank), then their monthly interests are automatically deposited to their nominated Commercial Bank. Since their amount of exposure doesn’t exceed 250,000  – they safe keep their interest earnings, and at the same time their initial capital of 250,000 is insured by PDIC. How else can you go wrong?

 

Below is a list of some Rural Banks offering competitive Time Deposit rates: (lifted from http://www.pinoymoneytalk.com/2008/01/18/double-your-money-banks/#more-773 )

 

1. Rural Bank of Paranaque – 5-years, 16% per annum (p.a.), interest paid monthly

2. G7 Bank – 8.25% p.a. gross for a P200,000 30-day time deposit

3. Rural Bank of Makati – 5-years, 10.5% p.a., interest paid at the end of term; 5.0% if interest is paid monthly

4. Philippine Rural Banking Corp. in Jollibee, Ortigas – 5-years, 10% p.a., interest paid monthly; double your money in 6 years, locked-in

5. People’s Bank Inc. along Alabang Zapote, near South Mall – double your money in 5 years, locked-in

6. Accord Bank in Ortigas Ext. near Antiopolo – double your money in 6 years, interest paid every 6 months

7.  Grower’s Bank in Angono Rizal – double your money in 6 years, interest paid every 6 months

8.  Banco San Juan in JP Rizal, near ABC Mall – 5-years, 8.25% p.a., locked-in

9. Planters Bank – 5.5% p.a. gross for 1-year placement; 6.5% p.a. tax-free for 5-year placement

10. First Country Bank – 5-years, 14% p.a., interest paid monthly

11. Rural Bank of Norzagaray (Bulacan) – double your money in 6 years

12. Finman Rural Bank of Pasig – deposit P27 for 6 days a week for 5 years, total cash out is P42,120, lump sum to be paid at the end of term is P50,000

13. University Savings and Loan Bank – 8% net p.a., paid lump sum (term to be confirmed)14. Producers Rural Bank – 6% net p.a. (term to be confirmed)

 For a complete list of Rural Banks and to know more about it, check out this website

 

Rural Bankers Association of the Philippines (RBAP)