Saving your money in general is good, but the recent blunder by a major bank in the Philippines that affected thousands, including myself, rocked my confidence with the said institution, but left me with some lessons learned.
Have Multiple Accounts in Multiple Banks
Have you heard of the phrase “don’t keep your eggs in one basket?” I’m not a stranger to this but somehow it didn’t really register to me until I was locked out of my own savings. For about three days I was living off my cash at hand. I always carry just enough money to get me by a few days so by the third day I only had enough cash for the bus fare home! Luckily, I have another account in a different bank so I was forced to use that. It was a very difficult decision because that other account is what I’m using for my loan. An extra withdrawal would also mean that my interest would fall back to 0.1% so that’s an extra loss for me.
On a side note, also remember that the maximum deposit insurance per depositor (not per account) in local banks (by PDIC) is ₱500,000. That means that in case of bank closure, you can only get ₱500,000 regardless of how much more your accounts had (with the rest depending on the liquidation of the bank and its assets) so if you’re one of the folks that have more than this amount in total in a bank, I highly recommend you distribute it to other banks.
Effective June 1, 2009, the maximum deposit insurance coverage is ₱500,000 per depositor. All deposit accounts by a depositor in a closed bank maintained in the same right and capacity shall be added together. — PDIC
It’s always a good idea to save some cash that you can get anytime in an emergency. This could be as simple as a piggy bank that you fill with coins or some bills inserted somewhere discreet. Sure, it doesn’t earn any interest and would lose value due to inflation but it’s worth the relief in cases like these.
Get a High-Interest Account
Many banks in the Philippines these days offer savings accounts that yield better interest than the usual savings accounts. The caveat though is that some of them only allow you to make a single withdrawal per month to yield the high interest, some only uses passbook, etc. I actually opened a new one because of this bank incident because my existing one (the one I mentioned earlier) already had an extra withdrawal so it’s now as good as a piggy bank. Treat this account as an emergency fund so you have a fallback when your accounts are inaccessible, and at the same time it yields some interest to offset some inflation while it’s on standby. I would not recommend time deposits and the like as your alternative/emergency fund because you cannot easily get your money from these.
When used wisely, credit cards can actually help you manage your budget. My credit card came in handy to save my remaining cash during the bank ordeal, but the catch though was that I had to make my purchases in stores that accepts credit card payments and it made me spend more than the usual (since some stores have a minimum amount for credit card purchases).
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In the end, my key takeaway from this bank brouhaha is to diversify where I put my money. That includes putting it in different accounts (savings and investments) in different banks. It’s hard to imagine that a major bank in the Philippines would allow itself to have an outage that would span days, but it did happen so it’s best that we always be prepared. In times like these, even your piggy bank would prove to be more reliable.