When I was a child, an ubiquitous TV ad continuously encouraged us “Mag-impok sa bangko!” And so we did. My siblings and I dutifully trooped to a bank branch to open savings accounts, proudly holding on to our brand-new passbooks as we walked out.
As the years passed, we put in our few centavos savings and the occasional gifts into our accounts, and saw our money earn interest and grow. When I graduated from university, I checked my balance and sadly realized that the value of what was in my passbook was pitifully small, as inflation had escalated the prices of goods much faster than my money had grown. I eventually joined the corporate world and got married, yet the pattern of putting money into low-yielding savings accounts and time deposits carried on. My husband and I were both engineers, “techies” who weren’t particularly interested in learning about proper financial planning.
When we built our house, we were left with no money and a huge loan. We were continually scrambling to pay our bills! Luckily, I joined Sun Life a couple of years after our third and youngest child was born. Through my work and the training courses we were encouraged to take, I learned about projecting our financial needs and allocating money properly to ensure that all these needs could be met. So when my kids were in high school I told them that they needed to learn to invest their money properly.
I wanted them to be more financially prepared than I was. I felt mutual funds were good investments for them – they didn’t require much money as initial investment was as low as 5,000 pesos, they didn’t need much sophistication as professional fund managers took care of managing the funds, they were relatively safe if you dealt with a stable and reputable organization, they provided choices, each of which was suited to a particular time horizon and risk profile, and they gave far better returns than savings accounts. I explained what mutual funds were, and gave them the prospectuses of the various Sun Life Prosperity Funds.
They had accumulated small amounts from their allowances and cash gifts on their birthdays, Christmas, graduation and other occasions, and they set out to determine how to allocate them. My youngest, Ino, was then 12 years old, and his question was, which fund is likely to earn the most? I told him it was probably going to be the equity fund, but he would have to be willing to leave his money in for at least five years as it also had the potential to drop the most in value over the short term. Being the most aggressive (or maybe it was because he was the youngest and didn't really understand!) he put almost all his money in the equity fund. Then one day he needed a fairly significant amount for a school activity and realized he didn’t have enough in his savings account. He needed to withdraw money from his fund, and unfortunately the market was down then and he had to take a loss. He learned another important lesson – you need to set aside enough for your day-to-day and emergency needs. Over the next few years, they continued to invest. They saw their funds go up and down with the market.
But they also saw that they were growing over time. They learned the meaning of volatility, risk and what a long-term outlook meant before they had to be out into the real world. And they saw that their money in the funds was growing a lot faster than any money they had in their savings accounts. When Ino's cell phone was stolen, he decided he'd get a new phone when his fund had earned enough to buy one. Meanwhile, my husband gave him his old cell phone to use. After some time, most of the letters on the phone's keys were completely faded, and the display was balky -- he often could not read the text messages he received. But he made do with the phone until he finally had enough to buy a new one. Just as he was about to withdraw the funds, however, he realized, "Mom, if I leave my earnings in, then they will earn too, right?"
When I said yes, he decided to just keep his money in and wait for another hand-me-down! By the time they graduated, their funds had grown significantly. And no, they did not have large allowances while in school. My husband and I made sure that they had a little bit less than everyone else, so that they would understand the importance of earning money, no matter how little, and that money was not always meant to be spent.
Now that they are working they have continued to invest, making sure that part of their income is always set aside, and they have tried other types of investments. My daughter is very disciplined, she invests a fixed amount every month and only spends what's left over, while my sons tend to accumulate funds and invest after they have a certain amount. And because their money is hard-earned and they understand how money can grow, they do not spend unnecessarily and rarely ever splurge.
To date, all our children are well into the world of adulthood. We are very proud parents to have been able to send them to the best schools, to see their achievements, and to see them able to live independently and stand on their own feet. Their responsible spending habits are testimonies to what we taught them: to spend mindfully on needs and set aside the rest of their resources for a well-planned future. I am confident that they, too, will be able to give their future families brighter lives and be able to provide their kids brighter lessons. That, to me, is one of the more important lessons I can teach my children!