Young people should be keen on investing

Young Filipino professionals are getting more conscious about the way they spend their earnings. The Banking, Financial Services and Insurance recently published its findings on ThoughtBuzz, a social media analytics, that young Pinoys are looking at putting some savings in their bank accounts. Which means that, in this age of expensive signature clothes, hip party places and mobile devices, the next generation is ready to face and embrace the future. Such happy news should also prompt us, especially those in the know, to act as their financial planner or consultant, for them to understand not only the value of saving, but also the importance of growing their money. 

If I were that financial planner for them, I would like to boldly say that savings may be able to save them for a while, but it cannot save them for a long time. It is not ideal to put their money in the bank let alone grow their money in time deposit. Inflation is the mortal enemy of savings. So if you save today, your money will not be the same next year because of inflation.

Which means, that your savings of one million pesos in your favorite bank, becomes 2 percent cheaper at the end of the year. It's because the country's inflation rate averages about 3 percent annually. Your income on interest (which is usually one percent per annum) is actually eaten up by inflation.    

Also, our young will eventually face more responsibilities as they enter marriage and become parents. Their needs become bigger and will eventually put pressure on their earnings. Thus, savings cannot be relied to serve the growing needs of young people who had just settled down.

As I have said, while we need to teach our young the importance of saving, we also need to teach them to optimize such saving to good and productive use. This can only be achieved through investing. If I were to also decide the kind of investment they should pursue, my personal choice for them would be real estate, putting up a business, and insurance-cum-mutual funds in that order.

With the Philippines getting a fresh upgrade by Fitch to one notch above minimum investment grade, the highest in history, our youth should be able to take advantage of the good investment climate to secure their future. Real estate comes first as a personal recommendation because it is safe, and offers better return in terms of rental income or resale. Investing in a condo or low-to-middle range housing would be a good start as they are now made affordable even for people working in call centers.  

Getting into business is also another way of increasing a young person's income. Buying a food franchise, a health and wellness salon or a beauty parlor, may be worth considering when starting out a business.   

Young people should also realize that they are not going to stay young for long. We will all end up losing our productivity. While real estate also offers a great deal of passive income upon retirement, redirecting your savings to variable insurance can help you get through your unproductive years or old age. It's such a pity that young people do not yet appreciate the importance of insurance. They only realize its importance when they are already old. The challenge goes to those in the insurance business to be more aggressive in educating our young professionals to understand the benefits of retiring without being a burden to their children.

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