By now, after reading the previous articles, you've realized that having only regular savings and passbook accounts is not gonna make you wealthy.
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| "silver-and-gold-coins" by Pixabay is licensed under CC0 |
If you follow the natural progression of bank accounts, the next step is to open a time deposit. However, given the low interest rates, it is not that efficient to have just a regular Peso time deposit account.
What you can do is to open a foreign denomination Time Deposit account. And as for this article, the denomination is in US dollar.
Why US Dollar?
Let us face it, the US dollar is one of the widely traded currencies globally and most countries are dependent on it for economic reasons.
Why Time Deposit?
Because your goal when starting out to the road to financial literacy is capital protection. You must play in the defensive while testing the waters. Time Deposits also offers varying interest rates depending on the lock-in period. Holding periods vary from 1, 3, 6, 9, and 12 months. Meaning, you don't have to wait for a year to earn some interests.
Since it is in foreign currency, the exchange rate will always fluctuate which is very advantageous if you play it right. As of this writing, the current exchange rate is Php 48.14 to a dollar. If the global economy is in the positive, the exchange rate will definitely rise. If this will be the case, then your account will also grow aside from the earnings coming from the interests.
For example, if you have $1000 (Php48,140) and the exchange rate in the future will be at Php52. Then you will have around Php52,000 by the time you redeem your time deposit. A Php3,860 difference is not bad of a progress when you are just starting out. Of course the bank will also get its profit by selling the dollar below its ForEx value, but the point still stands that you've earned.
In this article series, I will list the interest rates of a Regular Passbook Savings account offered by 6 known banks in the Philippines.
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| US Dollar Time Deposit Interest Rates Offered by Banks |
Click here to use the Annual Compound And Simple Interest Calculator to calculate your interest earned overtime.
By this time, you are done testing the waters in terms of starting your financial journey. You need to slowly swim deeper to the investments world if you want beat inflation rate and build your wealth.
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