Passbook or ATM, That Is The Question

How much does an everyday Filipino save from his regular income? 20%? 10%? Will you be surprised if I said that it’s less than 10%? I don’t think so. But I know you’ll be shocked to learn that our average saving rate is a dismal 2.5% percent our what we earn. That means that for every 100 pesos we earn, we spend 97.50 and we save 2.50 in an account somewhere.

This dismal rate can be explained by our attitude towards saving vs. instant gratification. Most of the time, instant gratification wins. And we’re even able to rationalize – or make excuses for – our spending. This can also be a factor of how accessible our savings is from us. Often, we make our savings too available for us, rationalized by the thought that anything can happen anytime.

Most of us have ATM Savings account provided by our employers. Most of these account carry no minimum balance requirements hence it’s easy to zero it out without any financial consequence. This “convenience” will ultimately be your own financial downfall because aside from not having any incentive to save, you also that out a barrier to spending.

By no means am I saying that ATM Savings accounts are all bad. As mentioned, ATM Savings account offers a lot of conveniences, primary of which is all-day, all-night, seven-day banking. You can withdraw money from any ATM, some machines offer deposit services – with some even offering real-time crediting to your account, you can also pay your bills through an ATM machine or use your ATM card as a debit card, and you can also transfer funds. Most ATM Savings accounts also provide statements of account so that you can keep track of your saving and spending activities.

Opening an ATM Savings account is also easier in terms of initial deposit requirements. In some banks, you can open an account for as little as 500 pesos. Therefore, starting your savings via an ATM account is easier and less prohibitive.

That is the problem with passbooks accounts; most passbook account require a bigger amount of initial deposit to open and a larger amount to maintain and earn interest.

But wait, you might be asking, it’s 2010 and passbooks still exist? Yes. Despite what you may think, there are still some people who get a thrill whenever they hand over a passbook to their bank teller for an account update. There’s a different sense of geekish accomplishment.

Aside from the sense of gratification that you get whenever you update a passbook, another beauty of a passbook savings account is that your funds are less accessible compared to when they’re in an ATM account. So you’ll be less tempted to withdraw every once in a while, because aside from having to go to your branch of account, you also have to queue up. The account itself also restricts you from withdrawing money because you have to maintain a minimum average balance and there’s also an incentive in the form of higher interest rates compared to ATM accounts.

If you’re keen on starting on your savings, why not start off by opening an ATM Savings account with a low initial deposit requirement. Build up your savings in this account until you reach an amount that will allow you to open an maintain a passbook savings account. For good measure, you can always keep your ATM savings account active in case you need it in the future.

In my next post, I’ll explore some ATM and passbook deposit products offered by banks these days.


About Benedict Bernabe

Benedict Bernabe, 27. Benedict has a Master's degree in Development Studies from the University of Melbourne, Australia and a Bachelor of Arts degree in European Languages, cum laude, from the University of the Philippines Diliman. He has worked with the United Nations in the Philippines as the Community Facilitator of the Community of Practice on HIV&AIDS. He worked with Standard & Poor's Capital IQ, a financial information company, as researcher, translator and quality analyst in the investment research team. Prior to this, we worked at IBM Business Services. Benedict is a certified yoga teacher.

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