How to start growing your money with just P1,000 by ABS and CITI

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How to start growing your money with just P1,000

ABS-CBNnews.com

Posted at 02/02/2015 9:35 AM | Updated as of 02/02/2015 10:55 AM

MANILA, Philippines - If you think P1,000 can only take you so far, maybe a movie with a friend, a couple of cups of gourmet coffee, or artisanal ice cream, you need to start looking at that bill in your wallet differently.
Why don’t you begin to view at it as an ‘investable’ amount? This change in mindset is often what it takes to get you started on the savings route.
At the outset, P1,000 may not seem much, but if you set aside P1,000 every payday, then you would have accumulated P24,000 in just a year. Note that P1,000 per payday means saving just P100 every working day.
To make this pot of savings grow bigger quicker, consider putting your money in an investment fund and let the magic of compounding work. You will be surprised at how much you will have over time. This simple strategy of continuously topping up and investing your money can give you real savings.

A look at compounding
Compounding is all about making your money generate savings, which can be reinvested to generate more earnings. If you invest your P2,000 at month at 6% per annum, that means that as the principal increases, it produces higher earnings in a month. Of course, it will take some time before you can really feel the effect of compounding, but the longer you keep your money invested, the more you stand you stand to gain.
Let’s see how saving P2,000 a month (obtained from setting aside P1,000 per payday) then putting it in an investment product that gains 6% per annum compounded monthly will look like in time.
At three months, it will be worth P6,060.20.
At six months, it would be P12,211.
After one year, you would have saved P24,794.50 instead of just P24,000 if you did not invest the money you’ve set aside.
After two years, your savings will be P51,118 instead of just P48,000.
After three years, it will be P79,065.
After four years, your money would have reached P108,736.
After five years, you would have saved P140,237—an amount which is certainly nothing to sneeze at but something which you would be able to gain with just a bit of sacrifice and a good measure of discipline.
Start growing your P1,000 today
Here are ideas on how to get started on this route:
Take baby steps. Remember that before you can grow big, you have to start small. If all you have to save for now is P1,000, be confident that with discipline, you can make this grow.
Set aside your savings before spending your earnings. This is the best way to ensure that you are able to keep to your savings target. Otherwise, you might end up using all of your funds, leaving you with nothing to save.
Keep your savings separate from the rest of your money.
Co-mingling is confusing and may lead you to occasionally touch your savings.
Top up your investment using online channels. This is the quickest and most efficient way to continue investing.
Don’t be too quick to spend your bonuses. While you may want to use some of it to reward yourself, make sure to use some of it to top up your savings.
Keep a long-term view. It’s a slow but sure way to make your savings grow, but the longer you save, the more you stand to gain.
Find the right investment product for your savings. There are many banks and financial institutions offering various investment products for retail investors like yourself, such as mutual funds, unit investment trust funds or UITFs, and savings products especially tailored for retail investors with savings goals like yours.
Mutual funds and UITFs are pooled investments that allow you to enjoy the services of a professional fund manager. These funds are usually invested in various investment instruments – money markets funds, securities, bond funds, and the like. They only vary in the way they are administered.
A mutual fund is an investment company that pools your money along with that of different investors and then invests these in various instruments. The mutual fund company issues shares to represent your holdings in the fund and issues shares based on the amount of your investment. The price of each share is called the net asset value per share (NAVPs).
Mutual funds are supervised by the Securities and Exchange Commission. UITFs, on the other hand, are sold by banks and are supervised by the Bangko Sentral ng Pilipinas. What you get are units of participation in the fund, whose value is called the Net Asset Value per Unit (NAVPU). The UITFs are also invested in various instruments to meet different risk profiles and investment objectives.
Wherever you choose to put your P1,000 per payday, make sure that you keep it growing by making your savings a real commitment.
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Grow Your Money is an editorial partnership between ABS-CBNnews.com and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.
Visit www.citibank.com.ph for more information.