Why Should Millennials Turn Savings into Investments?

Think of investing as a more efficient way of growing your money and securing your future. Check out these three compelling reasons why you should take your savings and put them into investments:

Compounding interest
This is perhaps the biggest reason why you should be investing as early as now. To illustrate compounding interest, suppose you place P10,000 in an investment fund that earns 2.5% every year. At the end of year 1, you will earn P250.

Because of compounding interest, you will earn another P256.25 the next year (P10,250 x 2.5% interest). Year 3? Your money will be P10,768.91. And it just gets bigger and bigger over time. The best part? Just imagine if the interest rate on the investment fund was higher than 2.5%. But to fully maximize compounding interest, you need time. Lots of it.

So, let’s say you start investing your mid 20s. Because your money had time to earn interest, you will have more than someone who started investing at age 40.
Did you know that certain investments also offer cash payouts? So, not only are you growing your savings, but you are given extra cash to spend for whatever you have in mind – travelling, gadgets, or funds for a hobby or passion.

Inflation
Inflation is a sustained increase in the general price of goods and services. This constant increase in prices means a decrease in the purchasing power of money. So, your P10,000 today will not be worth P10,000 5 years from now. For example, if you could buy 4 bags worth of groceries with your P10,000 today, in five years, your P10,000 might only be able to let you buy 3 bags worth of groceries.

If you place your P10,000 in a savings account, the interest you earn is so small that it will not be enough to cover the rising costs due to inflation.
On the other hand, if you place your P10,000 in investments, you can take advantage of much, much higher interest rates, more than enough to beat inflation.

Have an Emergency Fund
It’s always wise to set aside around 3-6 months’ worth of your salary should anything unfortunate or unplanned happen, such as a natural disaster, a major house renovation, a sudden illness in the family, or loss of employment.

Having an emergency fund means you don’t have to borrow money and be in debt, and it provides you some peace-of-mind.

Early retirement
If the idea of investing is to grow your money at a much faster rate, then you should be able to fulfill your life goals much faster. Depending on the amount and kind of investments you have, you may find yourself enjoying life more and working less before you hit your 40s or 50s.

If you don’t take advantage of compounding interest and the high returns of investing now, it may take you a much longer time to save up for a comfortable life. Manulife Philippines has affordable investment and life insurance plans that provide life insurance coverage while optimizing potential returns for your investment. If you want to know more, contact us today.