MANILA, Philippines – Students planning for their future should not only start saving, but should also consider investing their money.
On ANC’s “On The Money,” financial planning expert Salve Duplito stressed the power of compounding, saying that while saving up is important, there are bigger rewards in investing.
Savings as little as P25 every day from daily allowances can make earning that first million possible before the age of 50 if it is invested.
“If you start saving P25 every school day starting today and invest that at an 8% return every year, your little savings will grow to a million by age 49,” she said.
Putting money in individual stocks of companies that you are familiar with should also be considered.
“If you invested P25,000 in Jollibee in 2003, your money would be worth around P234,882 by early September 2013,” she said. This amount does not include dividends paid out by Jollibee over the period.
“This historical returns in no way guarantee that you will enjoy the same earnings in the future, but they show you what can happen if you study investing and not afraid of losing some money while learning,” said Duplito.
She noted that students are in the best position to invest because they have the luxury of time to learn, to make mistakes, and to recover.
Students with huge savings and are not breadwinners of the family can also benefit from the power of compounding.
For instance, a student with P200,000 savings can invest half of the amount in direct investments in blue chip stocks or equity funds.
The amount of P50,000 can be placed in a time deposit or money market account, while the remaining P50,000 can be used to start a business.
Duplito advised that personal and business finances should be separated.
“This way, you won’t spend money on gadgets you suddenly think you need. When you do that, you cannibalize your own business and at the same time, you can also avoid putting all your money into the business and forget to save for your future,” she said.
When eyeing that first million, Duplito suggested laying out figures on an Excel worksheet to figure out how much to invest every month and what kind of returns to target to reach the goal.
“Let interest from your investments earn interest and you will see the miracle of compounding by the time you reach 30,” she said.
source: www.abs-cbnnews.com
