A MISCONCEPTION ON SAVINGS (THE WRONG WAY OF SAVING:putting your money in your piggy bank)

When I was around 5 years old, banana cue (fried banana on a stick), my favorite snack food on stick was priced at around 50 centavos per stick, with 3 bananas on a stick. That was 29 years ago. Now, a banana cue stick, with 3 bananas on a stick, costs P12. That's an increase in price of 2400%. That means an increase in price of the banana cue by 83% per year. Or a depreciation in the value of the Peso by 83% a year, when it comes to the price of the banana cue. So, if I had saved my 50 centavos 29 years ago, when I was 5 years old, so I will be able to buy a banana cue 29 years after, I would be in the greatest shock of my life. How on earth could I buy a banana cue right now with 50 centavos?

Now, let's stop talking about banana cue. Let's look at the economic condition of our country. But first let me ask you a question. What is inflation? If you ask those so-called economic experts, chances are, they will provide you with technical answers. Something that you cannot easily grasp, especially if you have been sleeping in your Economics Class back when you were in school. Simply put it, inflation is the increase in the value of the goods or products and services which results to the depreciation of the value of the Peso. The banana cue situation above is an example of inflation. Fortunately, generally speaking, the average inflation in the Philippine economy right now is only 6%. That means your Peso has gone down in value by 6%. If you have a hundred peso in your pocket, the actual value of that is not 100 pesos but only 94 pesos. If you keep that P100 in your piggy bank, let's say for 10 years with an average inflation of 6% per year, at the end of the 10th year, you open up your piggy bank, you'll still find your P100 there, safe and sound, but the sad thing is that, the value of that P100 is no longer P100 but P54. What if instead of 10 years, you keep your money for 20 years? 35 years? Get the point? Sad to say that there are lots of Filipinos who are in the same situation right now. Scared of putting their money into investments because of risks, they instead put their money into their own piggy bank accounts because having their money right under their noses give them emotional security. Not knowing that the economy itself is a big thief. It takes the value of your money from you without you knowing it! Those who have tens of millions of pesos or more may not feel the harsh effect of inflation in the buying power of their money.

But what about those who doesn't have millions of pesos? What about those ordinary employees trying to save for their retirements? Will they have enough when they retire? Well, maybe they will have enough, but only enough for their sustenance. They won't have extra to spend for vacations, trips, etc. For me that's a very sad, unfortunate thing to happen to a retiree. You have been working all your life so it's just fitting that when you retire, you should enjoy the fruits of your labor.

If you wish to attend a FREE Financial Education Classes, email me at: grow_your_money@rocketmail.com or SMS me on 09196227997(Philippines) for details.

May God bless you and make your dreams come true!

Josh