The recent emergence of consumer-focused digital bank products has given millions of Filipinos power over their personal finances. Rather than spend hours lining up at a traditional bank, anyone can now transfer funds, invest, and make decisions that grow their personal net worth with just a few taps on their smartphone. Now, thanks to cutting-edge solutions like the Maya digital banking app, taking charge of your finances has never been simpler.
However, even with an account at the best digital bank, it still helps to be mindful of the basics of personal finance. In particular, you need to be familiar with interest, since it is the single most important metric in savings products and key to maximizing personal wealth. Let’s delve into what interest is, how it works, and why Maya just might be the most consumer-friendly digital bank PH has to offer.
What Is Interest?
From a bank’s perspective, interest is the cost of holding money owned by depositors. It is essentially a payment given by banks to depositors for the privilege of using their funds.
When you get a Maya Savings account, for example, we at Maya will pay you an interest of up to 15% per annum every day so that we can use your funds to manage our financial operations, fund our investment activities, and develop more innovative banking products for customers like you. Similarly, you can earn up to 6% per annum monthly in interest for funds held in a Maya Time Deposit Plus account, depending on your chosen tenor of 3, 6, or 12 months. Maya Personal Goals also works in much the same way, with Maya paying out 4% per annum monthly for each goal you set on the Maya digital banking app.
Are There Different Types of Interest?
Consumer banking depositors only need to be concerned with two main types of interest: simple interest and compound interest.
Simple interest is based only on the initial amount of money deposited, sometimes referred to as the “principal amount.” On the other hand, compound interest is based on the initial amount as well as the accumulated interest over time. Compound interest is exceptionally powerful because it allows your savings to grow exponentially over time.
Fortunately, the vast majority of consumer savings products in the Philippines offer compounding interest. With Maya’s market-leading interest rates, you may want to look into opening a Maya Savings or Maya Time Deposit Plus account to truly enjoy the remarkable power of compound interest.
How Is Simple Interest Calculated?
Understanding how to compute interest is crucial for managing your savings effectively. Let's start with the basics: simple interest. Simple interest is calculated on the principal amount—the initial sum of money that you deposit to your bank account. The formula for simple interest pretty is straightforward:
Simple Interest = Principal × Rate × Time
Where:
- Principal is the initial amount of money deposited.
- Rate is the annual interest rate.
- Time is the period the money is invested or deposited, typically in years.
For example, if you deposit PHP 1,000 in a savings account with a 0.5% annual interest rate for 5 years, the simple interest would be calculated as follows:
Simple Interest: 1,000 × 0.05 × 5 = 250
So, after 5 years, you would earn PHP 250 in interest, making your total balance PHP 1,250.
While simple interest provides a straightforward way to grow your savings, it doesn't take advantage of the powerful effects of interest compounding. The fact that the interest rates offered by traditional financial institutions in the Philippines are typically very small doesn’t help either. With compound interest, the interest you earn each period is added to your principal, allowing your savings to grow at an accelerating rate.
In the next section, we'll delve deeper into how compound interest works and why it’s even more beneficial for maximizing your savings. Understanding both simple and compound interest will give you a solid foundation to make informed decisions about your finances.
How Does Boosted and Compound Interest Help You Grow Your Savings?
Based on what we’ve learned so far, we can see that interest—particularly compound interest—works best when you have a larger principal amount. With any kind of interest, your account balance can steadily increase without you having to deposit more money. This benefit is amplified further with compound interest because growth accelerates as interest earnings are reinvested back into the account.
Building on the example above, let's say you deposit PHP 1,000 in a Maya Savings account and don’t add anything else for 5 years. Because Maya Savings compound the interest and because it can earn up to 15% boosted interest per annum credited daily, your savings will grow not just by PHP 150 (15% of PHP 1,000) each year, but by increasingly larger amounts as interest is calculated on the growing balance daily. As such, in the fifth year, the interest on your PHP 1,000 will not just be PHP 750 (PHP 150 x 5 years). You will not only have a total of PHP 1,750 in your savings but PHP 2,011.36.
Even better—because Maya Savings has no minimum balance, you also get to keep every peso you earn and save. Take note that the boosted interest applies to your first PHP 100,000 in savings.
Strategies for Maximizing Interest Earnings
To accelerate your savings growth, be consistent with these strategies:
- Start Early:The earlier you save, the more time your savings have to compound. Even small contributions early on will be amplified because of compound interest, leading to significant gains over time.
- Deposit Regularly: Also deposit regularly, especially during paydays, to ensure you continuously build your savings.
- Choose Maya for Your Digital Banking:Maya’s exceptionally high interest rates on its consumer savings products make it the obvious choice for growing your net worth. Get started on your path to financial stability with just 1 ID and no minimum balance required.
Switch to Maya to Earn More On Every Peso
Interest is a remarkably powerful tool for growing your net worth. Maya Savings, Maya Time Deposit Plus, and Maya Personal Goals feature remarkable interest rates that offer different types of depositors unique advantages for passively growing their wealth. Indeed, at the rates of up to 15% per annum credited daily for Maya Savings, up to 6% per annum credited monthly for Maya Time Deposit Plus, and 4% per annum credited monthly per goal for Maya Personal Goals, you will earn more in interest through Maya than you would through competing banks’ savings and time deposit products. In a real sense, Maya’s banking offers are a way for Filipinos to not only beat annual inflation but also to accumulate meaningful wealth over time.
To maximize your benefits from Maya’s digital banking products, it helps to have a deeper understanding of interest and other fundamental finance concepts. Once you do, you can make your money work harder for you. Whether you're saving for an overseas vacation or are planning for retirement, choosing Maya can be your first step to financial security and prosperity.
