Three Notions Why Saving Is Not Saving You At All


SAVING must be accompanied by maturity and not by instant gratitude or some kamikaze type of mental model. Anyone can always argue that they are saving, but the real question one should be asking themselves is, am I really saving? Did your decisions and actions to set aside money for future use mitigate the foreseen financial hurdles? Or did it result in becoming the problem? Saving is definitely not rocket science, but deciphering whether you are doing it the right way is the challenge.

We sometimes build wrong notions from the information we read and hear from others, especially if it was communicated in an ambiguous manner, thus making us vulnerable to wrong practices or decisions. Remember the time when you jumped into the stock market without doing your homework and then you started incurring losses? To keep your sanity intact you just told yourself “It’s okay, its equities, its long term.” But when your money is about to be depleted, you would then start blaming just about anyone, even the statues in your home. You wouldn’t want this ghastly scenario to happen. Hence, you might want to consider pondering on these three common notions.

  1. Spending is the exact opposite of saving. Indeed, not spending would definitely give you that extra peso, but there is an underlying problem if one takes this notion with a myopic mindset. Spending actually helps us save big time. The idea is to spend on the essentials and stop spending on the nonessentials.

Essentials means in the context of both basic and advance upkeep; nonessentials are those moments of splurging or impulsiveness like buying a new shoe just because your trust fund pal next door just got his new basketball shoes. You can skip medical checkup, healthy food, car maintenance and insurance to save money, but doing so could result in bigger problems in the long run, such as excruciating disease, serious mechanical damage and huge financial debt which obviously results in an increase of your payables.

  1. Price over quality. We are often caught up in the notion of spending less to save more, and I just want to highlight that this does not work all the time. Our mental model would often cue price to quality. Buying clothes that would last two years compared to a month should be the right thing to do. While it would be enticing at first to buy a cheap product, you always need to remind yourself to stay away from an insentient mindset, embrace forward-thinking and stick to value.

The scenario given would definitely end up costing you more instead of saving, since you would need to replace the product several times. The worst scenario that could happen is if it would cost you more than replacing an item, like costs due to the unintended consequences of buying these middling products (i.e. electronics), such as short-circuits that causes a fire. Keep in mind that you should not worry paying on essentials three times more the price of a mediocre product or service if it would give you three extra years of utility and convenience.

  1. Saving and investing are identical twins. This is one of the confused words in the domain of personal finance and this is no different from the most commonly misused words such as “skim and scan” and “discrepancy and disparity.” Saving money to secure an educational fund for your children versus investing to secure an educational fund for your children might sound synonymous, but you have gotten it wrong. One thing that makes these two saliently different is the risk embedded in them. To make it more relatable, let’s put this in the context of a romantic relationship.

Saving is like engaging in a boyfriend/girlfriend relationship where you try to save resources and give a considerable level of trust, effort, commitment and time to your partner in hopes of, and preparation for taking the relationship to the next level. The risks here are the factors you are entrusting and other matters you are giving up, such as time. Once you have ample resources and you have established a solid foundation for the above-mentioned factors, that is the time where you invest and take things to a whole new level through marriage by taking and enduring more risks like a factor of conjugality in hopes of being able to achieve greater returns—in this case,  to be with your partner for the rest of your life.


Earl Pagatpat is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 69th RFP program this July. To inquire, e-mail or text <name><e-mail><RFP> at 0917-9689774.


1,061 total views, 1 views today