13th-Month Pay Ideas For Financial Newbies

13th-Month Pay Ideas For Financial Newbies

While Christmas is all about giving (and spending), it wouldn’t hurt either to start saving or investing, while you still have the resources. Not to mention, it’s the perfect precedent for a financially focused New Year’s resolution.

The best gift that you can give yourself this Christmas is the peace of mind knowing that you have put in motion a plan to secure your finances for your future! Here are things you can spend on with the 13th-month pay that will help you do that.

1. Investment

Instead of draining your pocket this holiday season, why not make your money work for you through investments. There are various channels that could yield high returns for your money, and Unit Trust Investment Fund is one of them. 

You can easily dive into the world of investment with ₱20,000. For example, Security Bank offers a number of unit investment trust funds (UITF) which require an initial amount of only ₱10,000. 

UITFs pool the funds of investors to create a large fund which, under the watchful eyes of professional fund managers, can productively harness these funds, taking advantage of economies of scale,” according to Banco de Oro. Thus, even individuals can access investments usually just available to big investors. UITFs are also heavily regulated by not only the banks offering the fund but also by the Bangko Sentral ng Pilipinas, protecting investors.

UITFs are medium- to long-term investments that have historically better-earning options over a long horizon than traditional deposit options, so if you can afford to leave your money in a UITF without having to withdraw from it for a long time, it can be a good option for you. For example, if you had invested in Security Bank’s Peso Asset Variety Fund on January 1, 2014, these are the kind of returns you could be expecting (disclaimer: values from Security Bank’s UITF calculator. 

The investment value is only indicative of the value of the investment as of a certain date. However, for redemption, please note that the net asset value per unit (NAVpu) will not be known until the end of a certain business date.)

Initial investment3 months4 months5 months6 months
₱10,000₱10,819.98₱11,143.67₱11,098.78₱11,341.81
₱15,000₱16,229.96₱16,715.50₱16,648.17₱17,012.71
₱20,000₱21,639.95₱22,287.33₱22,197.55₱22,683.61
₱25,000₱27,049.94₱27,859.17₱27,746.94₱28,354.52
 

That’s an ROI of 13.42% over six months, which you can’t get with your regular savings accounts. Again, this is just an example, so please consult with your bank first to determine which fund is right for you.

Eastwest Bank also offers the Infinity Peso Intermediate-Term Bond Fund, another UITF which requires an initial deposit of P10,000. It’s a low-risk venture because the money will be invested primarily in government securities and investment-grade corporate bonds. This is ideal for investors with a long-term investment horizon.

Besides UITFs, there are also mutual funds, stock market and real estate investments, depending on your risk appetite. Growing these investments involves a certain amount of risk but if done right, it will help you get closer to your dream of earning passive income.

Other forms of investment include investing in yourself by taking a course, attend trainings and seminars, etc. to hone new skills for career advancement. You can also invest in items or gadgets that can help you earn money by monetizing your hobby or develop your skills further.

2. Insurance

The best gift that you could ever give yourself is a secured future, and what better way to do that than to get insurance. Because the inevitable can always happen (especially medical emergencies), being uninsured can leave you crippled financially. You need insurance to protect your health, your ability to earn income and to keep a roof over your head.

The main reason why 13th-month pay was implemented is to serve as monetary relief for Filipinos during the Christmas season, for them to enjoy and celebrate the spirit of Christmas better. This, however, doesn’t mean that you can only limit your spending to gifts and other forms of luxuries to treat yourself this Christmas season. 

Your 13th-month pay gives you the opportunity to offer protection to your loved ones against critical illness, accidents, or disability and dismemberment. You can use the money to cover the premium cost for the insurance that best suits your needs or to provide a safety net for your family.

Health insurance

For under ₱20,000 annually, you can avail of Maxicare’s MyMaxicare Silver Plan’s health insurance.  According to the calculator on their site, a 30-year-old applying for the plan, with dental coverage included, would pay P17,083.00 annually with the option of annual, semi-annual or quarterly premiums according to your needs.

Medicard’s Plan 2500 is another healthcare option, with a ₱15,876 annual fee. Hospitals include Asian Hospital and Medical Center, St. Luke’s Medical Center-Quezon City, The Medical City, and Cardinal Santos Medical Center.

A health insurance is a good start while life or variable life insurance (VUL)s which are increasingly popular options provide a wider safety net for those who need it.

3. Business

This is one of the conventional ways to invest your money.  While it may take some time to gain your starting capital back and start profiting from your business, it is the more hands-on route to grow your money and have more control over it.

Starting your own business can be expensive and challenging at first. That’s why it requires extensive research and diligent planning. You must determine what will sell in your target market and how to keep up with the constantly changing consumerism and competition.

In case you don’t know where to begin, here are the 8 promising business ideas in the Philippines‘ landscape considering its economic climate and available opportunities.

4. Savings/fixed time deposit

With time deposits, you essentially agree to keep your money in the bank for a predetermined period, say one year, without making any withdrawals until it reaches maturity. Banks offer a fixed interest rate which is higher than that of a savings account. The catch is, you are not allowed to make withdrawals or terminate the contract before the maturity term.

If you’d rather play safe with your money and don’t mind earning just a little bit of a percentage in interest every month, a time deposit account is a way to do it.

5. Emergency fund

The ideal emergency fund should be at least your three months’ salary. Your 13th-month pay is basically equivalent to a single month of your salary, but it’s good enough to kick-start your emergency fund. Your 13th-month pay may not be enough, but at least it’s a good amount to start building your emergency funds.

Another way is to take steps to reduce your debt with your 13th-month pay which will free up more money going forward to put towards your emergency fund and help to grow it faster.

Whether you plan to spend, invest or save your 13th month pay, make sure you do actually have a plan and avoid splurging it all impulsively this coming festive season!

Read More: It’s Easy To Calculate Your 13th Month Pay!

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