As we’ve repeatedly pointed out in the past, savings accounts are one of the most underrated banking products. Savings accounts are basically deposit accounts that enable you to make deposits into and withdrawals from them. Let us look at some aspects of savings accounts here in the Philippines:
Benefits of savings accounts
They are a safe and secure way of parking your surplus funds, they provide interest earnings on the account balance and they are highly liquid – you can usually access your funds whenever you want to – through various channels including ATMs, through Internet / mobile banking and through retail (online and offline) PoS transactions through debit cards.
Managing your savings accounts
Given that savings accounts have evolved into highly flexible, feature-rich products it is important to understand some of the basics of managing your savings accounts. We will focus on a few salient features that you need to keep tabs on:
Maintenance balance – We all know what an initial deposit is – it is the deposit required to open a savings account. But savings accounts also have maintenance deposit requirements. For instance, with the Peso Passbook Savings Account from BDO Unibank, you need a minimum initial deposit of Php 5,000. But you will need to maintain a minimum MADB (Monthly Average Daily Balance) of Php 10,000.
Interest-earning balance – This is yet another metric that you need to check on. Let us again take the example of BDO Unibank’s Peso Passbook Savings Account; you will need to maintain a minimum MADB of Php 10,000 to earn interest.
Citibank’s Peso High Rate Saver works slightly differently. With the Citibank Peso High Rate Saver account you will not earn any interest if your account balance falls below Php 100,000. You earn an interest of 0.70% p.a. if your account balance is between Php 100,000 to less than Php 2 million; for balances between Php 2 million to Php 5 million you earn 0.75% p.a. and if your account balance is Php 5 million or more you earn an interest of 1.00% p.a.
Withdrawal restrictions – Some savings accounts place withdrawal restrictions. The Build Up Savings Account (Premium version) from Security Bank has an opening balance of Php 50,000, a maintaining balance of Php 50,000 and an interest-earning balance of Php 50,000 while providing you with 1.00% p.a. interest. However, you can only withdraw up to 3 times in a quarter.
Managing savings accounts – a few more tips
Once you’ve become proficient at managing your savings account, you can look at opening and operating multiple savings accounts. You could use one account for your salary, one account for managing your home loan payments; you could have one savings account with foreign currencies enabled etc. This will give you more flexibility to plan and manage your finances.