Overseas Filipino Workers normally choose to work abroad so that they could provide financial security to their family. In that regard, it is important to make the right decision when it comes to managing their money earned abroad. The critical issue confronting OFWs who are in this situation is how to make their money earn; will they invest it or just deposit it in the bank?
However, arriving at a sound decision requires full understanding of the peculiarities of saving and investing. Investing is when you use your money to buy items or goods that you think will eventually increase in value over time and reap profits thereafter. Some invest their money in real estate properties, bonds and stocks. Savings on the other hand, involves setting aside a portion of your money in a bank where you expect it to earn over a period of time.
While they appear similar, saving money and investing money are entirely different things as explained by Joshua Kennon of the Balance, as they have different purposes and play different roles. His advice is to make sure that one is clear on this before beginning the journey to building wealth so as to save one from a lots of heartache and stress.
Donald Torino of Philippine Investment Expo has briefly summarized the differences between saving and investment into categories.
Investment has the potential for bigger returns. The value of your investment may appreciate over time at a rate depending on the nature and type of your investment. You make a profit if you sell for a higher price than what was invested initially.
Generally, savings account do earn interest but at a lower rate than investment. It takes a longer period of time to realize a projected growth in savings which may take years.
The better the return, the higher the risk that you have to face. With investments, you can earn significantly higher, even almost doubling your initial investment in a short period of time. However, you also run the risk of losing part or even all of the money you invest.
In the case of savings, the risk is very little or none at all. The biggest risk you have to encounter is when the bank closes down. Even then, savings account in the Philippines is insured by the Philippine Deposit Insurance Corporation (PDIC) of up to 500,000 Philippine pesos.
When making an investment, you aim for bigger and long term goal. The value of your investment may sometimes dip which will force you to hold on to it for a longer time and wait for the right time to sell for a profit.
Saving on the other hand, is usually done to achieve short term goals. For example, when you plan to buy a personal computer or similar items, you try to save a portion of your monthly income until such time that it reaches the desired amount necessary for the purchase of that item.
Access to Cash
When you invest in something, such as real estate or precious stones, your money is tied up with the investment. It will not be easy to withdraw it when you suddenly need cash.
With a savings account, you have complete access to your cash when you need it. The only limitation is that some banks have rules on the withdrawable amount per day. Some local banks limit it to Php 10,000 to Php 20,000 per ATM withdrawal.
Should You Save or Invest?
Your decision depends so much on your goals. Both have advantages and disadvantages.
Donald Torino expresses that for short-term financial goals, it is better to save your money. If you are looking to purchase a car, saving a percentage of your monthly earnings until you have enough is the optimum way.
Investing your money on the other hand is better for long-term financial goals such as getting ready for retirement so that your cash does not get affected by inflation over the years. Generally, the longer your money is invested in something, the better chances you have in making a good profit. Donald also suggests that you can spread your money on different investments to minimize your risk.