You hear this a lot. Saving small amounts of money consistently is more sustainable than winning a lottery. For example, saving PHP 1,000 (approximately USD 20) per month will produce PHP 12,000 in a year—the same as that 13th month pay we are expecting to receive in December. The thing is, that one event of getting the 13th month pay is actually surrounded by lurking ghosts. We might get fired, or we might resign, within the year, and we won’t get that 13th month pay in full. Or some emergency might happen which would make us spend our anticipated fund on some unanticipated event. By amortizing our goal over the year, we are also breaking down the risk throughout the year.
One might argue that saving PHP 1,000,000 monthly would take 83 years to build up PHP 1,000,000. That’s kinda shallow. Money is the best representation of things with time value. After developing the habit of saving, we develop the skill of managing risks. We start to invest. Let’s say a bank gives 1.5% post-tax interest per annum. Theoretically, monthly savings of PHP 1,000 would take 54 years, not 83. For moderate investments such as long-term government or corporate bonds yielding 5% per annum, it would take 33 years, not 83. For high-risk, high-return investments yielding up to 10% such as stocks, it would take 23 years, maybe even faster if you’re a good active trader, not 83.
Our bank deposits, the least risk, least-returns type of investment, would still be better than our chances of winning the lottery. Also, we would surely increase your savings as we grow mature in our careers. The most important thing that saving consistently is that we are also building habit and discipline, which transcends in other aspects of your life, and we can pass to future generations.
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