Becoming money wise

I'm very bad with money! Fortunately, my husband is very conscious of our finances which is why we've decided to calculate the amount of money we should save and spend each month. Luckily, my sister-in-law was an avid reader of Good Housekeeping Magazine (Philippines) and I came across a free booklet entitled "Get Money Wise! The Best Advice from Good Housekeeping," which was included in one of the 2005 issues. I would like to share my favorite money-wise move from the booklet, entitled Know your options, which introduced me to the various bank services I could use in order to maximize my savings.

Know Your Options

If you had only P50,000 to start a savings fund, what are your options? Where's the best place to stash your cash? One of your surest bets is to place your money in a bank. Deposits are insured by the Philippine Deposit Insurance Corporation (PDIC) for a maximum of P100,000 per depositor (right now, it's at P250,000 according to gsr_mj of GirlTalk...thanks, by the way!). And gone are the days when your only option is with brick-and-mortar banks. Now there's the convenience of Internet, phone, and mobile banking, on top of the accessibility provided by automated teller machines (ATMs) and local branches.

According to Allan Hizon, corporate products marketing officer of the Bank of the Philippine Islands (BPI), here are some things to consider when opening an account:

• How long will I keep my money in the bank?
• Will I need to use it often and withdraw periodically?
• Do I prefer to split my money by investing in two or more accounts?

Keep in mind that the longer a bank keeps your money, the higher the interest rate it applies. Another reminder: Interest rates fluctuate, often on a daily basis, so it is best to make direct inquiries with the banks concerned to get the real numbers; the rates provided on the next few pages are just a rough guide. Here are a number of options:

Treasury Bills (T-Bills)

Banks offer government securities, which are essentially debt instruments issued by the National Treasury to finance public expenditures. These include T-bills, short-term debt instruments that are risk-free since these are direct obligations of the Philippine government. Investment term is from 30 days to one year, depending on availability. Investments are subject to a final 20 percent withholding tax on the interest, confirmation of sale certificate, official receipt, or debit advice. Chinabank offers T-bills for a minimum investment of P50,000, while Banco de Oro requires a minimum of P10,000.

Treasury Notes (T-Notes)

In contrast to T-bills, treasury notes are long-term, low-risk, high-yielding debt instruments. Investment term is from two to 25 years. The yield to maturity is based on net present value, and you can enjoy coupon interest payments, where interest is based on principal, rate, time (PRT), minus the applicable withholding tax. As with the T-bill, you are issued the same documents, and the interest income is also levied a 20 percent final tax. Chinabank offers t-notes for a minimum placement of P50, 000. Banco de Oro offers five-year fixed-rate Progress Bonds for a minimum investment of P25,000, and four-year Retail Treasury Bonds for a minimum investment of P5,000.

*If you actually understood T-bills and T-notes, then go ahead and put your money there. As for me, when I read those two items, I was like, wat da heck?!?

Trust Funds

It doesn't take millions to invest in trust funds, you just have to be resourceful in finding something that fits your budget. This is how trust funds work: Banks' investment managers place your money in a diversified portfolio of government securities, loans, commercial papers, and other securities. You then get a share in the portfolio's gains together with other individual investors. The yields are very competitive, and you can even maintain financial flexibility since there are available placements for a minimum holding period of 30 days. Banks also offer a common trust fund designed for small investors seeking a high-yielding liquid portfolio. Funds are pooled and placed in diversified fixed-income securities.

Equitable PCI Bank offers the Small Investors Risk Free Fund for P5,000, with a minimum holding period of 90 days. Banco de Oro has a Smart Money Fund with a P10,000 minimum investment. Tip: Make your transaction in the morning as banks have a cut-off for trust funds, usually around noon. The prevailing market rates or unit priced change daily. If you go after cut-off, the next banking day's rates apply.

*Trust funds..nah, I don't think so..too complicated..

Time Deposits

If you want to save for the future, yet want to start small, then time deposits (TD) are the way to go. Your money is kept in the bank for at least 30 days, and you can get the interest when it matures. Interest rates are based on prevailing market rates, which may range from 2.3 percent to 3.5 percent. They are subject to documentary stamps (about 30 centavos fr every P200) and a 20 percent withholding tax. Check with the bank if they offer automatic rollover, so you won't need to go to the branch every single time io reinvest when your deposit matures.

Special Savings

These require a higher minimum balance than regular saving accounts but earn higher interest rates, which may be from two to 2.6 percent. Banks offer passbook-based or ATM-based accounts, with some having slightly higher interest rates for the ATM-based. Some people prefer passbooks to discourage withdrawals, but ATM cards offer convenience and accessibility (think emergencies in the middle of the night, and no branch to run to.)

"At BPI, you can either open a multi-earner savings account (which gives a higher interest rate if you make no withdrawals for the month) or platinum savings account (ATM-based) for P25,000," says Hizon. "Passbook-based platinum savings will require P50,000 minimum monthly average daily balance (ADB). Interest rates are tiered, you can withdraw two times a month, and the platinum savings comes with a free accident insurance."

Other banks have similar special savings schemes:

• Equitable PCI Bank offers Optimum with a minimum daily balance of P20,000. You can access your account with a passbook and ATM card, and withdraw up to three times a month.
• Chinabank offers MoneyPlus Savings, with a minimum monthly ADB of P20,000. Interest rates are tiered, a passbook is issued, and the maximum number of withdrawals is twice amonth to earn premium interest.
• Unionbank has Unionbank Premium Deposit, where you can enjoy time deposit interest rates for maintaining only P10,000 in monthly ADB, plus you can withdraw up to two times a month.

Regular Savings

If you need to get money periodically and want to split your options, then open a regular savings account. Having a savings account is so much better than keeping your money at home. This earns interest and you can easily withdraw whenever the need arises.