We all know that saving up money is very important. However, not all of us are able to do so.
Are you one of those people? You know you need to save, but no matter what you do, you can’t seem to get started.
One common factor of not being able to save is discipline. When funds are easily accessible like in your safe at home or a normal savings account, you are more inclined to withdraw and use it for stuff that may not be that important.
If you are like this, then a time deposit may be the right type of investment for you.
What is a Time Deposit?
Time deposits are considered as a low-risk investment that is a great start for those who are new to investing. These are a type of bank account that are locked for some period of time.
In exchange for being able to withdraw your funds like in a normal savings account, you get higher interest in time deposit. You just have to wait until your investment “matures” so you can claim the money or invest it again.
Money in time deposits is insured for up to half a million pesos by the Philippine Deposit Insurance Corporation or PDIC.
Here are some terms you need to know before investing in time deposit:
Initial Deposit – This is also called the minimum placement. It is the required minimum deposit for you to open an account. For time deposit, it can range from P10,000 to over 1 million pesos.
Tenor – This is also called maturity. It is the length of time that your money needs to stay in your account in order to mature. For a time deposit, it can be as fast as 30 days or as long as 10 years.
Interest – This is also called the return. This is the percentage of your money that you can expect to be returned to you on top of the money you initially invested. For a time deposit, it varies per bank.
Certificate of Deposit – This is also called proof of deposit. It is the certificate that the bank gives you to prove that you have money in their time deposit.
Pros and Cons of Time Deposit
Like in other investments, time deposit has its own share of pros and cons. It’s just a matter of assessing yourself and your needs to figure out if it is for you.
- Higher return compared to regular savings accounts.
- Flexible tenor, you can choose from 30, 60, 90 days up to 10 years.
- Automatic rollover ensures that your deposit renews even with no action from you.
- Low-risk and auto-pilot investment.
- Enforced discipline because you can’t withdraw your money.
- You can’t terminate easily.
- Fees are charged when you prematurely terminate.
- Interest is lower compared to other investments.
How To Start
To start your time deposit account, go to your bank’s website or go to their branch directly and ask about their products.
As a rundown, here is a list of some banks and their time deposit products as of April 29, 2020. Note that these may change without further notice.
BPI Islands / Family
BPI has two products for time deposit. One is the Peso Automatic Renewal Time Deposit where your deposit automatically renews for a fixed yield. The other one is the Peso Express Time Deposit which is better for short terms like 30 days or longer.
Rizal Commercial Banking Corporation offers a bit higher interest at 2.375 on deposits of P100,000. Once your money reaches half a million pesos, the interest goes up to 2.50%. This encourages people to save up more and get rewarded for their patience.
It is easy and more affordable to start a time deposit at China Bank. For a minimum of P5,000, you can have a 0.950% interest at one year tenor. Their P100,000 has a 1.075% interest rate.
These are just some of the banks where you can start your account. It is still advisable to do some research and pick the bank where you can get more benefits.
Are you ready to start your time deposit account? Before you do, here are some last minute tips.
- When choosing your bank, remember that banks with a long history tend to give lesser interests.
- Choose a product where it is less of a hassle to manage. Look for auto-renew products if possible.
- Don’t forget your convenience. Look for banks that have online banking.
There you go, good luck taking a step to a better future.