Should I save for long-term financial planning?

With its stability and low risk, bank savings are chosen by many Vietnamese people. The advantages of this form are high liquidity, flexible terms... However, savings interest rates are often lower than other investment channels.

According to financial experts, the real positive interest rate on deposits in Vietnam over the past 10 years has been around 3%/year, which means the nominal interest rate is around 7-8% minus the inflation rate of 4-4.5%. In reality, the inflation rate may be higher.

If we compare the average interest rate increase of the deposit channel with the real estate price in the market, there is a certain difference. For example, if you save 4 billion for 10 years with an average interest rate of 7%/year, after 10 years you will have 6.8 billion VND. Meanwhile, with the average increase in real estate prices of about 10% per year according to the report of the Vietnam Real Estate Brokers Association from 2014 to 2021, 10 years later the price of the house will reach nearly 8 billion VND.

Therefore, it is difficult for investors to build a large amount of assets if they only save for the long term. Therefore, investors should consider their financial goals and investment preferences to allocate assets appropriately.

How long should I save?

Based on the need to use the savings deposit, investors will have the appropriate term choice.

- If you need to use the savings package regularly in the next 3-5 months, a 1-month term deposit is the most reasonable. Because most banks apply the same interest rate for a 1-3 month term. After 1 month, the depositor can withdraw both principal and interest and decide whether to continue depositing or not. At that time, the customer will receive interest and have money to use for other purposes.

- If you have not used your savings for 6-7 months, you should deposit it for a 6-month term. The interest rate for a 6-month term is usually higher than that for a 1-month, 3-month or 5-month term.

- If you do not use your savings in the next year, you should choose a 12-month (1-year) term deposit. This is an ideal interest rate, and many banks even apply preferential policies with additional interest rates to encourage users to save.

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