In the Philippines, the millennials are taking over the workforce. Statistics show that by 2030, they will account for at least 75% of the total number of employees. This also means that these individuals, whose ages range from 25 to 40 years old, are earning a good amount of money.
Not only that, they also expect to retire comfortably, according to a survey. The problem is, only a few actually have a monthly savings plan. An even small percentage is thinking about or doing investing.
So where should millennials place their money to achieve their goal without compromising the lifestyle they wish to live today? Here are a few ideas:
1. Life Insurance Policy
When it comes to insurance, there’s some good news: studies show that more Filipino millennials are actively engaging in these types of products. At least 32 million have some form of coverage, according to the country’s insurance commission.
However, a lot more need to get on board while they’re still young. As emphasized by most insurance providers, the younger the policyholder is, the cheaper the premium is.
Moreover, they have more options when it comes to insurance coverage. They can pick term if they want the most affordable and renewable. Otherwise, they can start building their retirement nest egg with a life insurance investment that places a part of the premium to different portfolios such as bonds and stocks.
How about health insurance? Today the Philippines already offers universal healthcare, and many businesses provide HMO, whose coverage may also extend to their dependents or loved ones.
However, if the millennial is susceptible to a certain illness or believes they won’t be staying in the same company until retirement, they can supplement the options above with a private insurance policy. A good financial advisor can help them choose a coverage that fits their budget and needs.
2. Investment Vehicles
Millennials now have a variety of investment vehicles to choose from, depending on their appetite, tolerance, or profile. For example, if they are risk-averse, they can opt for money market funds, certificates of deposits, and even personal equity and retirement account (PERA).
The last one helps them build a retirement plan apart from that provided by the Social Security System at a much higher yield. This is because the investment income is tax-exempt.
For moderate investors, they can consider mutual funds, which are pooled money from different investors. This allows millennials to participate in trading without spending a lot of money. An investment-linked insurance policy can already put your contribution to a mutual fund of your choice.
Aggressive investors can join the stock market and cryptocurrency where the risks are high but so are the potential returns. Millennials, though, have an advantage. Since they’re young, they will have enough time to recover their losses should the markets go down or crash.
For a home in Makati’s central business district, the average price square meter is already 232,000 pesos. In other places, the cost of a single-detached or attached house increased by 2.4% during the third quarter of 2019. Condominium unit prices saw a sharp rise of nearly 30% within the same period.
Moreover, unlike in other countries, millennials may have fewer options for home loans. They can try PAG-IBIG, which offers affordable interest rates. But that means paying a mortgage for up to 30 years.
When it comes to land, prices also went up by at least 4.5% or over 500,000 pesos per square meter during the first quarter of 2016. One can then imagine how much it would cost now. In fact, property values could still increase by 27% within the next five years.
Usually, land and home appreciate over time since the former is a finite resource. There will come a time when the demand is high as the population grows, but the supply is low.
For millennials, now seems the best time to grow their money on real estate. Land and home are still cheaper today than they will be within five years. They have more options on where to invest or live, and they have plenty of time to pay for the mortgage.
Granted, everyone lives only once, so one might as well use their hard-earned money to gather experiences or buy personal items. In reality, though, no one knows what happens in the future. A millennial today may live for 50 more years.
Therefore, it’s still better to be prepared at all times by making the most of the money they earn. These three ideas can help grow and protect their reserves.