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Why a Savings Plan Matters in a Well-Rounded Financial Portfolio

Why a Savings Plan Matters

A savings plan is key to building a well-rounded financial portfolio. Achieving financial stability and independence is surely an aspiration you hope to achieve no matter where you are. This becomes especially crucial as you progress in your financial journey and begin to understand how essential it is to manage your finances effectively.

A well-rounded financial portfolio contains not only your investments but also a structured savings plan and insurance coverage. A good financial portfolio balances growth, security, and liquidity, helping you meet both your short-term needs and long-term goals. Savings plans, in particular, provide the foundation for building your future without compromising your present.

This article explores why savings plans are essential for every Filipino and how crucial they are on your financial journey.

Understanding Filipino Savings Plans 

A savings plan is a structured approach to setting aside a portion of your income with a specific financial goal. These plans provide a disciplined way to save, breaking down significant goals into manageable steps and offering features like interest earnings, tax benefits, and, in some cases, insurance coverage.

In the Philippines, savings plans come in various forms, utilizing instruments such as traditional savings accounts, government-backed programs, or investment-linked insurance plans.

Here are some of the most common options:

  • Basic Savings Accounts with local banks like the Philippine National Bank allow individuals easy access to funds through ATMs, physical branches, and online platforms while earning a modest interest.
  • High-yield Savings Accounts offered by online-only banks provide higher interest rates than traditional accounts, though they may have limited accessibility.
  • Time Deposits are savings accounts that lock in your money for a set period in exchange for a higher interest rate, ideal for long-term savings with lower liquidity needs.
  • Pag-IBIG Contributions are government-mandated, but the compounding interest earned over time can create a substantial fund for retirement when you cash out.
  • Pag-IBIG MP2 Savings Program is a voluntary government-backed plan offering high dividends, making it a popular choice for Filipinos who want higher returns than standard savings accounts.
  • Investment-linked Insurance Plans, such as those offered by Allianz PNB Life, combine savings and investment opportunities with added security, typically including life insurance coverage to protect your loved ones.

There is no one-size-fits-all solution. By combining these plans, you can maximize accessibility and earning power, aligning your savings strategies with your specific financial goals. 

When Should You Make a Savings Plan?

Savings plans are living documents. Having one does not mean it should remain static; instead, it should evolve as your financial needs and goals change. Adjusting your savings strategies over time is key, especially as your life circumstances develop.

That being said, if you’re wondering when the best time is to create a savings plan, the truth is that it was yesterday. The next best time is now. No matter where you are in life, here are some tips to help you get started on a savings plan:

  • Early Career: If you’re a young professional just beginning your career, starting with a basic savings plan is crucial. Building the habit of setting aside money and establishing an emergency fund are excellent first steps. At this stage, consider hybrid products like savings and investment plans that allow you to grow your funds and prepare for future needs.
  • Family Planning and Education: If you’re planning to start a family, it’s time to consider a more structured savings plan. This should include funds for education, childcare, and medical expenses. At this stage, consider increasing your emergency fund while exploring low-risk investments to build wealth for retirement and family needs.
  • Pre-Retirement: As you approach retirement, the focus should shift from growth to capital preservation. Opting for low-risk instruments such as high-yield savings accounts, time deposits, or investment-linked insurance plans like the Allianz Power Link Elite - offering insurance coverage up to age 100 - provides security and stability for retirement.

Savings Plans: A Pillar of Financial Independence

Filipinos increasingly aspire to financial independence, whether it’s the growing popularity of the Financial Independence, Retire Early (FIRE) movement or simply the freedom to pursue passions without the pressure of needing an income. A well-structured savings plan is critical, allowing individuals to set aside money and benefit from compound interest and guaranteed returns.

For example, a young professional who contributes regularly to a savings plan in their 20s can accumulate significant wealth by retirement. The earlier you start saving, the more you benefit from compounding returns, and by retirement age, you’ll have a substantial fund to draw from. For many, this peace of mind in retirement is invaluable.

Many Filipinos also realize that relying solely on pension programs from the Social Security System (SSS) or Government Service Insurance System (GSIS) may not provide sufficient financial support during their twilight years. While these programs offer some assistance, they are unlikely to meet all needs during retirement.

Why Are Savings Plans Important for Building a Well-Rounded Financial Portfolio?

A well-rounded financial portfolio is designed to withstand personal financial challenges and broader economic fluctuations.

Here are some reasons why savings plans play a vital role in achieving this balance:

  1. Protection Against Volatility: The Philippine economy is susceptible to fluctuations due to local and global factors. Investment portfolios heavily reliant on high-risk assets like stocks or real estate can lose value quickly in a downturn. A savings plan, on the other hand, utilizes low-risk financial instruments, providing predictable returns and a buffer against market volatility.
  2. Building a Financial Safety Net: For most Filipinos, family is a top priority, and securing their future with a financial cushion is one way to show love and care. A savings plan prepares you and your family for unexpected expenses, ensuring you have funds available in emergencies without liquidating investments.
  3. Accessibility and Flexibility: Savings plans in the Philippines are accessible to a range of people, from salaried employees to freelancers and small business owners. With options that range from basic savings accounts to more complex savings and investment plans, you can choose flexible tools that align with your financial situation, making them attractive for Filipinos of all income levels.
  4. Guaranteed Returns and Peace of Mind: A primary benefit of savings plans is the guarantee of returns. Savings plans protect your funds from inflation and the risk of poor investments. Knowing that your money is growing at a steady, fixed rate provides peace of mind, especially for Filipinos who prioritize financial security over high returns. 

Choosing the Right Savings Plan for Your Portfolio

With various savings plans available, choosing one that aligns with your goals, risk tolerance, and life stage is essential. Everyone’s situation is unique, so consider your goals carefully when selecting a savings plan.

It can also be helpful to consult with financial advisors to choose a savings plan that matches your goals. Allianz PNB Life offers unique savings plans that combine investment and saving to grow your funds while protecting your assets.

If you want to learn more about our savings plans, contact us today!