Saving Basics - How I Save

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Ants prepare for a rainy day by instinct. We humans, however, need to learn how to save. As a financial advisor, I get to attend talks and trainings to widen my financial know-how. Let me share with you what I've learned so far.

Saving vs Investing

Putting something away for safe keeping until it is needed is the basic idea of saving. Converting this into an appreciating asset or putting it in an instrument that will make it grow is called investing.

Not everybody is prepared to lock their money away and forget about it until the time of need. Much less, put it in investments because there are risks involved when investing (more on that next time).

When it comes to saving money, there's always a common goal in mind - to be liquid in time of need. So, what exactly should we be saving for?

Saving Goals

When I was a kid, I had a piggy bank. My mom told me to fill it up so I can buy whatever I wanted with what I save. As I grew older, I kept my money in a savings account and I drew from it to shop or travel.

Old school savings

These days, I have multiple bank accounts to park money for different purposes, like home expenses, kid's tuition fee, a new gadget, a house someday and the dreaded 'emergency'.

We all have different goals in saving. The key is to identify whether it is a need or a want; short-term goal, recurring goal or long-term goal. 

Saving Basics

If you want to go by the book, the proper way to budget your income is this way:

100% INCOME

- 50% Bills, Living expenses, Health (needs) 

- 20% Savings 

- 20% Other spending (wants/tithes) 

- 10% Insurance, Investment

Others divide it into 50-30-20 - whatever works. You don't have to compute everything down to the centavo, just make a mental note of the proportions.

Emergency Fund

If you're just starting to build savings, the first thing you should tick on your checklist is an Emergency Fund. 

Money experts always talk about this. An emergency fund is basically 3-6 months worth of your income/expected expenses (for irregular income). This fund serves as your buffer in case of income disruption (illness, job loss, natural disaster).

Once you're all set in this area, you can move on to saving up for other things. 

Our household expense tracker

My Money Mantra

My saving strategy is not perfect and clear cut. But I strive to steer things in the right direction.

Aside from making frugal choices to curb spending, ingrain this to yourself:

Money: Don't think of ways to spend it; Instead, think of ways to grow it! 

In Tagalog, as I always tell my kid upon handing him his weekly allowance (and because local tongue has more impact):

'Yang pera: Wag mo isipin kung san mo gagastusin; Isipin mo kung paano mo paparamihin!

Does this article help change your attitude towards saving? Leave a comment below.