Another full year has passed. Though it was probably not the most fruitful one for some, we reflect on what good came out of an entire year regardless of how bad or unfruitful it was (at least based on the opinion of others). And one important area that we need to evaluate is that of our finances.
In the previous years, we have shared with you some of the most helpful investment programs and ideas, whether government-controlled such as the Pag-IBIG MP2 Savings Fund or otherwise. And hopefully, you have come to maximize its benefits in the year that has passed. Remember, these programs benefit the most through the value compounding of your investment.
Here Are 4 Important MP2 Savings Strategies That You Need to Know
However, that’s not the only way you can benefit from investment programs, particularly the Pag-IBIG MP2 Savings. In this guide, we will share four strategies wherein you can capitalize on the features of the MP2 program, no matter how big or small your investment may be.
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Strategy #1: Compounded MP2
This is the most common technique through which you can grow your investment. This is especially useful for those who have medium-term financial goals, which can be achieved within 3 to 5 years. This may require an amount that you may not be able to put up presently, and postponing it later in the future would give you more time to save up. These goals can be any of the following:
- Important life events including weddings, anniversaries, reunions, and the like.
- Lifestyle activities such as vacations abroad.
- Purchase or a down-payment for a property or vehicle.
- Capital for a business or franchise.
- Education for your children
- Professional development such as taking student exchange or post-graduate studies
With these kinds of goals, you can have several investment options such as bonds, money market, time deposit products, savings account, long term negotiable certificate of deposit, and balanced funds. There are also the more aggressive equities and index funds, but as you can imagine this level of risk is not for every investor out there. Moreover, experts recommend that equities require at least a decade to ride through the ups and downs of the stock market.
That said, the Pag-IBIG MP2 is particularly designed for these goals as its maturity is within 5 years. Moreover, if you let the dividends compound at the end of the maturity, you can gain more out of your savings.
How this Strategy Works
- Save monthly, yearly, or one-time.
- Let the savings stay in MP2 to mature
- Withdraw the funds at maturity (5 years)
- Enjoy the benefits of compounded interest.
Strategy #2: Dividend Pay-out
So, you’ve completed your savings dues for the whole year, but what if you need to withdraw your dividend at the end of each year? Here are some examples where you might need the extra funds:
- Expenses for annual trips
- Payment for annual fees such as club membership, homeowners association, etc.
- End-of-the-year purchases such as gifts, house repair or home improvement, etc.
- Celebrations such as birthdays and other family events.
- Donation to charity, church, and the like.
- An additional source of income aside from your annual retirement fund.
How this Strategy Works
- Be consistent with your MP2 Savings
- Upon opening your account, make sure to indicate that you’d like to get your dividend yearly.
- Enroll a bank account to which your dividend will be credited.
- Receive your annual dividend.
- Withdraw your capital upon maturity.
- Rinse and repeat.
Strategy #3: Tiered MP2
Depending on the need, you can claim your dividend on a yearly basis. However, this can yield the most profit only if you invest a large amount of money. But in situations where you want bigger returns than what the dividends can offer:
- Child education
- Tuition and higher education fees such as for post-graduate studies or professional education.
- Mortgage and other big expenses.
This strategy takes advantage of the fact that you are allowed to open multiple MP2 savings account.
How this Strategy Works
- Open one MP2 saving account each year for the next four (or more) years.
- Begin saving P500 monthly in the first year, P1,000 monthly in the second year, and P1,500 in the third year, and so on.
- In Year 5, you can withdraw the first MP2 savings.
- In Year 6, you can withdraw the second MP2 savings, and so on.
- You may also opt to do this on a yearly basis.
Take Caution
One possible disadvantage of the tiered MP2 strategy rests in the fact that you would need to increase your savings by twice the amount each succeeding year. The relief begins on Year 5 as you would have one less account to save up for.
Strategy #4: MP2 Rollover
And finally, for those who would are wondering if MP2 Savings can be used for long-term investing, the answer is yes. But this isn’t as simple as putting in money in the bank and forgetting about it until its maturity period.
For this strategy to reap maximum benefits, you will need to “master” as in keep doing two things. The first one is to wait for your MP2 savings to mature every five years. Second, by keeping your savings intact for its entire maturity period, only then can you maximize the earning features of the MP2 program.
With these things in mind, the goal of the MP2 rollover strategy is to keep your savings in the program and let them grow as long as you want. One of the benefits of this strategy is maximizing the potential for compound earnings longer than 5 years.
How this Strategy Works
- Open an MP2 account.
- Save monthly, yearly, or one-time.
- At the end of the maturity period (5 years), withdraw your money.
- Open another MP2 savings account.
- Put your savings back into the new MP2 account.
- Rinse and repeat.
Perhaps, the only downside to this strategy is that there have been reports that it might take quite a while before you can get back your money, some lasting for months. During the time that you are unable to withdraw, that can be a missed opportunity of earning passive income for your savings. Also, some people might find it inconvenient to keep closing and opening accounts every five years. Unfortunately, there is yet no option for automatic rollover is not yet available to the investing public to date.
2020 may not have been the year everyone had hoped it to be, but all of that is in the past now. This 2021, a good commitment that you can most definitely start with is by investing in your future through the MP2 savings. And now, you can even try out any of the above strategies to capitalize on the program’s features.
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