'Why keeping your bonus in the drawer is not a good idea'

Ma. Esther Salcedo-Posadas

Contributor

THE news you read every day tells you that there’s more bad news to come. In fact, some people have already gone into panic mode enough to send world stock markets into a nosedive, at least over the last few months.

Something tells you that global economies could be approaching just the beginning of a recession. With a little extra cash this Christmas season, you figure that perhaps you ought to keep the money in your pocket for complete safety.

Security has a price tag and if you are looking for a 100-percent risk-free savings approach then holding the cash could be quite costly, especially with double-digit inflation rates. This simply means that in the long run, you will have much less than what you have today if you can’t find a way to earn more than the inflation rate.

The Philippine National Statistics Office (NSO) reported an 11.9 percent year-on-year headline inflation rate in September 2008, which was a little lower than the 12.5 percent year-on-year headline inflation rate in August 2008. For 2008, the year-to-date inflation rate was pegged at 9.2 percent.

Given the above numbers, it is easy to see why keeping your money in a savings or checking account also doesn’t go very far.

Unless you need the cash for immediate expenses and other important purposes, it may not make sense to keep investments in very conservative instruments if your main goal is to maximize the growth of your money. Thus, there is a need to find other avenues for earning money.

Just bear in mind that the higher the return that you desire, the greater the risk factor. If you can’t afford to lose the money, then safer albeit less profitable instruments may be a more logical choice. This holds true for people who are getting ready to retire, for example.

For those who are prepared to face risk, it is important to study well. If you care to start your own business, find a mentor or read books and newspapers to check trends. If you wish to invest in real estate, it is important to remember the long-term nature of this investment.

Once you’ve given that down payment, it may not be too easy to get out. However, it is also such barriers to entry that have allowed other people to earn from the venture.

The stock market is another area worth exploring. Certain billionaires have made their money in the stock market simply by buying intrinsically sound and undervalued companies during troubled times.

Suffice to say, they also did their homework by studying finance and reading the numbers, even visiting the actual business establishments. They were also willing to wait long enough for their investments to bear fruit.

The question of how much cash to keep is a personal choice that involves many consequences. Life is a constant struggle just as growing your money involves effort on your part. While it is quite tempting to bury the gold in the sand, it is your money’s fruitfulness that will eventually send you laughing all the way to the bank.

(Feedback at joy.posadas@gmail.com.)