When is the Right Time to Save?

Another one from my Idol – Bo Sanchez.

Knowing the importance of Saving and Planning, the next question would be, when is the right time to save? The best answer would be NOW!

Spending is a habit, so is Saving. If we could only have the discipline to save while the sun is up, then I’m sure that we’ll have more than enough when the rain starts to pour down. Take it from the children story of the ants. All they do is save, save, save. So that when winter comes, they don’t need to look for food cause they’ve save enough. For humans, we can elevate this habit. Instead of save, save, save, we can add the invest at the end. So it becomes, save, save, invest. This way we only not utilize the power of Time but the power of Compounding Interest as well.

timeLet me illustrate this one by borrowing the story ‘again’ from Bo Sanchez’ 8 Secrets of the Truly Rich. I really love this one, the story of Pilar and Pepe and the power of Time and Compounding Interest.

One day, a 22-year old good-looking guy named Pepe read about this principle of saving 20 percent of his income. He was earning the small salary of P 8,000 a month, but he decided to save P1,600 a month anyway. That came to about P20,000 a year. Being a financially wise man, he invested it in place that gave him 12 percent interest per year. Pepe saved P20,000 every year until he reached the age of 27.

That was when he met the pretty Pilar – a woman who was exactly his age. (They even had the same birthday.) Pepe discovered that she didn’t save, so he encouraged her to do what he was doing.

So Pilar started saving also P20,000 a year at age 28, putting her money at the same place where Pepe invested his -earning 12 percent interest a year.

But at the same year, Pepe left for China to be a lay missionary and couldn’t save anymore.

After six years, Pilar had saved exactly the same amount of money Pepe did. But at the age of 33, Pepe called her up and said “We need someone like you in China. Please come and be a lay missionary like me!” So she went and could no longer save as well.

At the age of 62, both Pepe and Pilar came back to the Philippines for good.

Upon deplaning, Pepe did the unexpected. He planted one knee on the tarmac and said, “Pilar, will you marry me?”

Pilar wiped a tear and said, “Gosh, I’ve waited for this proposal for 40 years. Yes, Pepe, even if we have no money. I will marry you!” And they hugged each other.

Pepe however said, “Well, I think we have a little money. Remember when we were in our 20’s and 30’s? We saved some money.”

Pilar said, “That was really small. I remember saving P20,000 for six years. That’s only P120,000.

Pepe smiled, “Hey, me too! I also saved P120,000. I think that’s enough for the wedding!”

So excitedly, Pepe and Pilar marched to the office where they invested their money years ago.

“Excuse me, sir,” Pilar said, “I’m Pilar and I’d like to know how much money I have…”

The guy in front of the computer said, “Let me see…” After a lot of suspense he said, “Aha, here it is. My records show that you have P4.8 million.”

Pilar fainted.

When she recovered, she told Pepe, “You’ll probably have the same amount of money! Ask them.”

Pepe asked, “Sir, my name is Pepe, and I’d like to know how much money I have.”

The guy looks at his computer files and says, “According to my records, you have P9.6 million.”

Pilar fainted again.

She said, “That’s impossible. We put the same amount of money! Each of us put P120,000. Why is his money double of mine?

The answer came, “Because Pepe saved six years before you did.”

And so Pepe and Pilar had a grand wedding and lived happily ever after.

Remember what Albert Einstein said about the greatest magic in the world? Daily compounded interest worked day and night for Pepe and Pilar.

Here’s the table of computations for Pepe’s and Pilar’s investments:

Age Savings Total Age Savings Total
22 20,000 22,400 22 0 0
23 20,000 47,490 23 0 0
24 20,000 75,590 24 0 0
25 20,000 107,060 25 0 0
26 20,000 142,300 26 0 0
27 20,000 181,780 27 0 0
28 0 203,590 28 20,000 22,400
29 0 228,030 29 20,000 47,490
30 0 255,390 30 20,000 75,590
31 0 286,030 31 20,000 107,060
32 0 320,360 32 20,000 142,300
33 0 358,800 33 20,000 181,780
28 0 402,860 28 0 203,590
29 0 450,080 29 0 228,030
30 0 504,090 30 0 255,390
31 0 564,580 31 0 286,030
32 0 632,330 32 0 320,360
33 0 708,210 33 0 358,800
34 0 793,200 34 0 402,860
35 0 888,380 35 0 450,080
36 0 994,990 36 0 504,090
37 0 1,114,390 37 0 632,330
62 0 P 9.6M 62 0 P 4.8M

What’s the lesson of the story?

Here it is: Don’t get married at 62. I’m kidding.

There are actually two very important lessons in this story:

Lesson #1: The earlier you save, the better.
Lesson #2: You need to know where to invest your savings.

Banks are good places to put our emergency funds and business funds. But never put your retirement and long-term savings there. It won’t work.

Save first and spend later.

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Garry Zaldy de Castro is an advocate, Financial Advisor, Certified Investment Solicitor (Mutual Fund Representative), blogger, IT practitioner, husband to Aileen and a dad to Jacob and JohnD. He started Financial Planning Philippines in 2008 just to share his financial learning to friends, relatives and anyone who wishes to be financially independent.


  1. There may be not an exact investment that can give you a guaranteed compounding interest of 12% or 10% or if there are that will tell you its guaranteed, beware coz these maybe scams.

    The closest investment where you can attain these interest is mutual funds. But one must know that mutual funds are have risk factors and are not guaranteed.

    But by cost averaging, these risks can be minimized if not totally eliminated.

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