Your 30s: Getting established

If you have not yet already done so, the 30s are the time to lay the foundation for future wealth. You will probably be earning more now as you will have progressed in your career, just like 37-year-old Leo Tamayo, husband to congressional executive assistant Caroline, father to three small children, and owner of a home in Antipolo that he, as an engineer and contractor, has built himself.

If you are married and are starting a family, your expenditure is likely to have also increased dramatically. You may be paying for a mortgage on your home. If you have children, you will need to start planning how you will pay for their higher education. You may also be now supporting your elderly parents.

If you have dependents or people who rely on you for their income, you will almost certainly need life insurance to provide for their needs if you suddenly die. You will also need health and disability insurance to provide income and help pay for medical expenses. It is also wise to make a will, stating how your wealth should be distributed upon your death.

Emergency Cash

You will need a larger emergency cash fund than when you were in your 20s. The actual size of the fund will vary according to your circumstances and personal preference. Some people link it to their salary level and keep the equivalent of their income for, say, six months or a year in cash. Others, particularly wealthier people with assets such as apartment buildings or condominium units that need constant maintenance, tend to maintain their cash as a fixed percentage of their assets.

Since you keep the cash fund to deal with emergencies, it should be easily accessible. A time deposit or money market fund in a bank is probably best.

If you have children, you will need to be saving for their higher education, especially if you hope to send them abroad to university. Since you can accurately estimate when you need this (for instance, the Tamayos would need the money for their eldest child, aged eight, 10 years’ from now), you can commit to a long-term savings plan that will produce a higher return than you can obtain from a time deposit. Options include an educational plan, where you buy units, each worth P100,000. If you have a lump sum available, you can purchase bonds for this purpose.

Buying A Home

Purchasing a home is a form of long-term savings since you avoid paying rent right now and will own a valuable asset once the loan is paid off. The return will vary greatly, depending on the long-term outlook for real estate in your locality and the terms of your tenure. If, for example, you can only obtain leasehold on your home that lasts a few decade, its market value will diminish as the lease shortens over time. Many people wish to keep their homes all their lives and pass these on to the next generation so they do not regard their home as part of their investment portfolio.

The sooner you begin saving for retirement, the longer your money will have to grow, so it is worthwhile to begin saving as soon as possible, even if you can only afford to contribute small amounts in the early years. You can save for retirement through a pension scheme (if it is available), cash-value insurance, or diversified mutual funds.

If your income increases in the future, it is strongly recommended that you increase your rate of savings as much as possible. Ideally, your retirement nest egg should generate an income that is far in excess of your needs because inflation will still exist even during your retirement. If you spend all the interest that you earn, the real or inflation-adjusted value of your nest will slowly diminish as will the buying power of the investment income.

(For more information on how you can build your personal wealth or to schedule a free financial check-up, you may call Citibank at 894-7162.)