MANILA – Want your money to grow faster? If yes, you might want to consider putting your cash in a time deposit account. But if you really want them to grow, you may want to check out the time deposit rates of digital banks.  

A time deposit is a bank account that earns interest after a maturity date. Unlike standard savings accounts, you can only withdraw from your deposit account after its maturity date. Withdrawing before the maturity date may result in penalties and payment of documentary stamp and withholding taxes. 

Below are the interest rates and tenors–or the time period during which the bank holds your money–of various digital banks. Digital banks offer higher interest rates than traditional brick-and-mortar institutions because of their smaller overhead costs.

Some banks offer different interest rates depending on the tenor, or how long you plan to maintain the account. Other banks meanwhile offer "booster" rates depending on whether your balance meets the goal you set. 

Growing your money: Should you put your savings in digital banks?

Erik, a 31-year-old who works in business analytics, said he opened time deposit accounts with Uno and Union Digital because they are high-earning vehicles that won’t lock him out of his money for more than 6 months. 

“I might need the money for possible investments,” he said, noting that he is also into US stocks.

“Does it help? Well, every little bit counts. I always say any money that isn't spent or invested is money wasted,” he added.

Pag-IBIG MP2 savings

Aside from time deposits, however, another way to grow your money is investing in Pag-IBIG Fund’s Modified Pag-IBIG II (MP2) Savings.

The Pag-IBIG MP2 Savings Program is a special voluntary savings program with a 5-year maturity for active Pag-IBIG Fund members. This is for those who wish to save more and earn higher dividends in addition to their Pag-IBIG Regular Savings.

The Pag-IBIG MP2 Savings Program requires a minimum P500 per remittance. Users can remit a one-time lump sum amount for the whole 5-year period of their MP2 Savings.

In 2023, the dividend rate for the Pag-IBIG MP2 Savings Program reached 7.05 percent. 

Alexander Villafania, a 46-year-old who works for a large financial institution, said he invested in the MP2 Savings Program as he is looking toward his retirement. 

Pag-IBIG dividend rate for MP2 savings rises to 7.05 pct, regular savings also up

Aside from his MP2 Savings, Villafania said he is also invested in time deposits, stocks, bonds, unit investment trust funds, and variable universal life insurance.

“So far, I’m happy with my investments,” he said. “There have been a few times that I’ve lost money but since I monitor the markets intently, I can anticipate if and when I need to pull out. If I did lose money, it’s only minimal,” he explained.

He also said he ensures his investments always beat inflation rates. 

“So far, all my investments are earning 6.5 percent and above. One of the best is MP2, which is [at] 7 percent.” 

But which is the better savings instrument for the Filipino?

Not ‘one-size-fits-all,’ says economist

“Pagdating kasi sa investment, parang damit yan,” said RCBC Chief Economist Michael Ricafort. “Hindi lahat ng investment, one-size-fits all.”

“So iba-ibang tao, iba-ibang sukat , iba-iba din ng type,” he explained.

(Investments are like clothes–not everything is one-size-fits-all. There are different measurements, different types of clothes for different types of people.)

Ricafort said a person’s choice of investment should depend on their risk appetite and financial goals–whether it’s saving up for retirement or funding their kids’ college education.

What’s important, he said, is that a person diversifies his or her investments.

“As the adage [goes], don’t put all your eggs in one basket. So, dapat diversified. Kung may mangyari man sa isang part ng investment, may iba pang safe pa rin,” he said.

(You must be diversified. If something happens to one part of your investment, the other parts must still be safe.)

Ricafort encouraged Filipinos to take advantage of the many investment instruments being offered by banks and other financial institutions. 

“Lalo na ngayon at least, medyo may mga professional fund managers na, na pwedeng mag-manage on behalf ng iba-ibang funds, yun tung mga ino-offer like (exchange-traded funds) ng mga bangko, pati yung mga ibang investment funds. So pwede naman sila mamili, para ma-maximize din.”

“At hindi lang naman financial products…puwede rin property,” he added.

(Especially now that there are professional fund managers who can manage different funds on someone’s behalf, like exchange-traded funds or other investment funds. They can pick their own products so these can be maximized. And it’s not just financial products…they can also invest in property.) 

The economist also said one must consider the interest rates, the tenors, and the credibility or reputation of the fund manager before opening a time-deposit account. 

But the best way to prepare for investing in a time deposit is by making sure you have ample savings, Erik said.

“You have to amply prepare your finances to avoid pulling out your money from your time deposit/MP2. Make sure you have enough money in your current savings for 6 months,” he said.

Villafania also stressed the importance of sticking to a budget and not borrowing money to avoid pulling cash out of your time deposit.

He noted that time deposits and MP2 are a good start, but there are a number of investments that can help grow your money faster.

“There is no such thing as perfect timing when investing. Instead, use time to let your money grow. Some take years to grow and rely on compounding interest to grow even more,” he said.

Bad loans by digital banks rise

In April, a newspaper reported that bad loans held by digital banks climbed in February, noting that the non-performing loans (NPL) made up 21.64 percent of their sector's loan book--about six times larger than the NPL ratio of traditional banks.

The Bangko Sentral ng Pilipinas also said only 2 of the country's six digital banks were profitable so far.

But BSP Director Melcho Plabasan told ANC that this is not a cause for worry as breaking even takes time.

He also said that only 20 out of 453 digital banks worldwide are profitable so far.

"We do not consider it as a threat right now, it's not a concern right now because as I'm sure you are familiar with how the typical business operates. It's not only the business of banking, normally it really takes time before you become profitable," he said.

"And normally you would spend a lot in terms of operating expenses, in terms of establishing the core operations, contact center, hiring people while your products and services are picking up," he said.