Settling down is a life-changing decision for any couple. Not so long ago, my husband and I were in the same boat, figuring out how we could survive by ourselves when we finally determined we were ready to build our own family. Beyond the expenses we would incur for the wedding itself such as the church and reception, outfits for the whole entourage, entertainment and photography, there were bigger decisions to be made: Where will we live after getting married and how do we manage our finances for our future family?
For couples who aspire independence from their parents, early financial planning is critical. Those who have invested in some assets such as real property and financial instruments, even as a single person, can confidently take the plunge and be independent from day one. For many, this remains to be a major question — Can we afford to live independently? To answer this, the couple must assess their options given their joint financial capacity.
Building your family’s funds
If you are a couple still building your coffers for a home, it is important to set aside part of your earnings towards smart investments. But where should you put your money? I personally recommend that you diversify into short-term and long-term instruments, and between deposits and investments that suit your risk profile.
You can put aside a part of your savings in deposit products that offer guaranteed principal and interest. You have the option to go for short-term deposits or for time deposits as long as five years. The longer the term, the higher the interest. Interest earned on deposits is subject to 20 percent final tax, except for five-year time deposits which are tax-free for individual investors. For couples with a longer time horizon, the five-year time deposit is definitely an advantage. Remember to choose a bank that you can trust with your money and can give you the appropriate advice depending on your needs and preference.
Meanwhile, some investment products can offer higher returns than deposits but may carry potential risks on principal depending on how the market behaves. I suggest you look into mutual funds and unit investment trust funds. These investments options have fund managers with in-depth experience in how financial instruments move in relation to economic and industry factors. The advantage of a fund is that it is a diversified pool of investment assets. You can choose from various funds with varying levels of risks, from minimal risk to highly volatile assets.
One of the attractive investment options especially among those starting out would be stocks. It entitles investors to a part of a corporation’s earnings and assets through dividends or coupon pay outs, which can be freely traded at any time of the business day. For beginners, opt for what is called blue chip stocks which are issuances of large, well-established companies with regular dividend or coupon payout, and whose stock price is less volatile. It is important to read up and research on the companies whose stocks you are planning to buy. Evaluate the quality of their management, their vision, their strategic priorities, the strength of their financials, their historical performance, among others. Stocks may be purchased through brokers or, for more convenience, online brokers with websites and apps that make trading easier. You may want to check out BPI Trade, which allows clients to buy and sell various stocks being traded in the Philippine Stock Exchange at their desired strike or exercise price.
You may also want to diversify your investment in the form of foreign currency. If you are only holding peso investments, consider converting part of your money to foreign currency. Many are aware that exchange rates move daily, depending on the relative strength of a country’s economy and on a currency’s demand and supply. Like any investment, you need to assess if there is an upside and time the conversion. You also must ensure you have an attractive investment outlet where you can place the foreign currency in. If you want a currency with stable demand globally and with various investment outlets, be it in time deposits or mutual funds, the US dollar is a good choice.
Investing In your family home
The next item in your must-accomplish list when settling down should be getting your own home, especially if, like us, you want to be independent from day one. We were fortunate to have saved enough money to make a downpayment on a townhouse and the balance we were able to get a home loan from BPI Family Savings Bank.
Since buying a home is a big investment, it is important that the developer is reputable and has a good track record. Equally important is the choice of a bank that can provide you with expert advice on what to consider such as amount of equity, loan term which can be up to 20 years, and interest rates. The bank’s loan account officer can help you compute for the amortization you can afford to pay given your monthly income. If the property you are buying is from a developer that has a tie-up with the bank, the decision can be as fast as five days and the amount of equity required may be lower.
Securing your family’s future
Lastly, starting a family also means being more mindful of the future and the unexpected. When you’re young, you don’t think of sickness nor death. This is why availing of insurance are farthest from many young peoples’ minds, including young married couples. However, you should realize that having life and health insurance provides coverage and security for your family.
Insurance companies such as BPI-PHILAM offer a wide range of products to choose from. There are customizable life insurance plans based on a person’s needs such as amount of coverage, premium payment terms, additional coverage for critical illness and bonus coverage or discount on premium payments for maintaining a healthy lifestyle. There are also life insurance plans that provide investment opportunities to realize high returns.
As for health insurance, there are products that have a money-back feature, a 10-year plan, a shared health insurance plan for two, and products that offer benefits for having good health. Some health insurance can also pay income when the insured is hospitalized.
Getting insurance while you’re young has the benefit of cheaper premium payments. And when you think about it, insurance is one investment that you must make to ensure that the future of your young family will be cared for in case something happens.
Given the options available for newlyweds and young couples, making smart investment decisions requires help from the experts. While it is good to ask family members and friends, their personal circumstances differ from yours, their dreams are not necessarily the same as yours, and their needs vary from yours. This is why I highly recommend seeking valuable advice from a trusted and knowledgeable financial institution — a bank that understands your dreams and aspirations and can help you achieve them. It is possible to be financially independent. And, there is no better time to start than now, while you are young.
