If at the end of the month or fortnight you managed to save or set aside some money, congratulations. You already did the most difficult job. Now think about making that effort and sacrifice really worthwhile, because if you put “to work” your savings you can get a little more, instead of just keeping them at home.
Despite its drawbacks, the informal saving method is the most used by Mexicans: almost half, 43 out of 100, keep their money at home, under the mattress, in batches or with their families, according to data from the National Commission for the Protection and Defense of Users of Financial Services.
Why shouldn’t you save “under the mattress”?
The main risk of “saving” in this way is that money is not capitalized, that is, it stagnates without generating any interest that results in a small profit for people. According to the bank and the investment mechanism that the person chooses, a savings of 10 thousand pesos could be up to 12,500 pesos after 5 years.
The logic is as follows: by putting your money in the bank, you are “entrusting” real and immediate resources to them, which in turn, these institutions will have to invest or lend, and for which they will obtain returns that must return you with proportional gains. The advantage of this exercise is that, although there is a risk in investments, banking institutions are always obliged to support the integrity of your savings.
On the other hand, stagnant money is devalued. Remember that “inflation” is the increase in the price of goods and services during a given period. Inflation is what makes the kilo of tortillas that cost $ 6.50 5 years ago, and today costs $ 12.50. Look here for a graph of the inflation explained with tortillas!
As you can see, the value of money decreases, for the same amount of pesos we do not buy the same today as five years ago. In economic theory it is said that healthy inflation is between 1.5% and 2%. This means that the money we keep at home will lose every year, minimum between 1.5% and 2% of its value as well, just because it is saved!
Remember, the way you save your money translates into the type of savings you use, and above all it is the way you take care of your money.
Other disadvantages of informal savings
There are more inconveniences than benefits when using “the mattress” or any informal method to save your money, consider among the most common:
- You can lose it
- Can be mistreated
- Can be stolen
- As we have said, it does not generate any return, interest or remuneration.
Nor do we recommend that you ask a friend or family member to save the money you have saved, as you will not have any formal guarantee that when you need to have your money, the person you left it to will be able to return it to you.
Interestingly, only 50 percent of the Mexican population uses some type of financial service, according to Condusef, and the main cause is distrust of the population in banking institutions. However, on savings issues as we have seen, the house will always be the most insecure place to save money.
Why use formal savings?
Here we refer to the money you save in authorized financial institutions. When you make this type of savings, the entity or bank is responsible for the custody of the deposited funds and should give you the possibility to dispose of them in the terms that both agree.
The main advantage of formally saving is that, along with choosing an option according to your needs, you receive real benefits for saving your money, such as returns and interest. You will also begin to form a good credit history if in the future you are interested in financing.
3 strategies to earn more money for your savings
1) Start taking care of your money with banking products called “micro savings”, for example savings banks or checking accounts without opening costs or minimum balance. No matter that your deposits to these accounts are minimal, the really valuable thing is that you will begin to capitalize on your savings efforts and avoid the temptation to have money at home.
2) Invest your money in medium or long-term funds, because they give you more interest than the funds in which you can have the money at any time. As a recommendation, leave some money in the checking account that you can always take (for emergencies), and the rest invest it in long terms (up to 6 months) so that you see a better profit.
3) Once you manage to consolidate your savings, think about diversifying them !, this means saving in different ways, and translates into receiving different benefits. Examples of other ways to save are trusts (for example, educational or retirement), or life insurance.
Do you want to know other ways to care for and grow your money? Visit our blog to find out what alternative savings tips and actions you can consider.