When to Open a Savings, Time Deposit, and UITF Account

Knowing where to place your hard-earned money is just as (if not more) important than working for it. Sadly, winging your money just isn’t the smart thing to do. If you’re unsure where to go with your finances, things can sound really confusing and complicated fast.

The first step to responsible money management is to establish a clear financial goal. It could be short-term like buying a new phone, paying for your next trip or more long-term ones like an education or retirement plan. The point is, knowing what you’re saving for tells you what direction and how much risk to take. With a clear objective, you can now narrow down your choices to a couple of financial instruments.

Here are 3 of the most common financial instruments you can open to get started:

1. Savings Account

Easy and convenient, a savings account allows you to deposit your money at a bank for safekeeping — smarter than when your grandma used to hide it behind the cupboard. In addition, a high-yield savings account allows you earn up to 1% of interest on top of the monthly account’s balance.

It’s particularly useful for when unexpected expenses arise such as car or home repairs or emergencies in the family. Withdrawing cash is easy with the numerous branches and ATMs around the country. A healthy savings account should not only meet the certain maintaining balance, but also be able to handle at least 3 months’ worth of regular expenses to function as an emergency fund when things go south.

Open a savings account if you want your money to be in safekeeping with the bank, ready to be used for anything, anytime and anywhere, all while earning up to 1% of interest monthly.

2. Time Deposit

If you’re looking into saving for long-term goals but still want to maintain a low-risk tolerance, a time deposit account may be the one for you.

With a time deposit, you’re allocating a certain amount of money for a fixed period of time with a corresponding interest rate — during which the amount cannot be withdraw. Time Deposits are also insured by the Philippine Deposit Insurance Corporation or PDIC so you can rest assured that your money is in a safe place.

Most time deposits have investment periods anywhere from 30 days to 1 year, while more long-term variants may last 2 years and up — this can be ideal for someone looking to secure capital for their own business.

However, you should keep in mind that–unlike a normal savings account–the money you put into a time deposit cannot be withdrawn until the date of maturity. This can be a good thing or a bad thing. It might not be for you if you have immediate financial obligations. On the other hand, it can be extremely beneficial if you’re in it for the long haul.

While traditional investments can earn a higher return, time deposits require no effort after your initial deposit has been made. In short, a time deposit gives you a higher returns than a regular savings account with significantly less risk than an investment. And because your money will be locked-in for a certain period, it’s even protected from yourself (and your sudden urges to spend).

Want to know more about Time Deposits? Read How to Protect Your Savings (Even From Yourself)

Open a time deposit account when saving for specific financial goals like going on a big vacation next year, or even opening a small business.

3. Unit Investment Trust Funds or UITFs

Ready to get even more from your money and start investing altogether? Enter UITFs. This type of investment is perfect if you’re ready to risk a bit more for higher returns but still can’t handle the level of risk and amount of know-how required to play ball in the stock market.

Based on your risk appetite — measured by taking a Client Suitability Questionnaire — Trust Managers can determine whether or not you can handle a conservative, moderate, or aggressive fund.

Banks typically offer three basic trust funds: Money Market Funds, Bond Funds, and Equity Funds, with terms varying anywhere from 3 months to 3 years. Historically, investments always perform the better in the long run, so if you want to make the most out of your money, don’t be afraid to invest in a long-term fund.

Unlike time deposits, UITFs aren’t insured by the PDIC. This means that yes, there is a possibility to lose money. But if you think you can stomach the ups and downs of the market, then UITFs will get you more in the long term. Besides, experienced fund managers are provided by the bank’s trust division to ensure your investment is always pointed at the right direction. In case you change your mind, you can always withdraw or pull out your investment at any time.

Choose a UITF if you want to try your hand at investing without diving too deep in the middle of the stock market ocean. With professional fund managers to guide you while doing most of the leg work, it’s a great way to expose yourself to the financial world and — along with free financial seminars — learn valuable lessons on investments.

Try our investment calculator to see how much you can earn by investing in UITFs.