Most people nowadays are considering cash as king. Is it a buying power for most stocks, and investments or just money for something to hold on to sitting in the savings accounts in our banks? According to PESOLAB, Interest rates in savings accounts in the Philippines ranged from 0.6% to 4.0% in which Equicom ATM Savings account held the lowest, and ING Savings account held the highest. On the other hand, inflation keeps on soaring. Furthermore, goods and basic commodities are soaring as well due to inflation. For example, 500 PHP worth of diesel is equivalent to 10.63 liters – 10.80 liters in 2012 according to the Department of Energy. Further to that, if 500 PHP is up to date, it would be only 6.0-6.2 liters. A big difference compared from 2012 to the year 2022.
Financial literacy is very important as it will play a big role throughout the years. Cash; a lot of people are wondering and aiming to hold a huge amount of cash without planning on what to do with that certain amount of cash. For example, when a certain person wins the lottery with a huge amount of money, they usually end up poor again. All the cash that he/she had were distributed to different wants such as cars, houses, his/her family, and so on. However, these things are only outflows in which there is no income occurring. With that, they end up being poor again.
Do you think that cash is king? This will depend on the perspective you have whether you’re a trader, investor, an employee, or a citizen who wants to have cash in a savings account or on hand. There are advantages and disadvantages to having cash. It would differ based on the perspective that you have.
Here are the advantages of having cash:
1. You have more buying power (Liquidity)
Having more buying power means having more options. For example, you can buy things at a discounted price if you’re buying in bulk. You are also more capable of planning and executing as you won’t have any money restrictions.
Here are the disadvantages of having cash:
The value of your money is being affected by inflation – meaning, your cash is shrinking in terms of buying basic goods and commodities since inflation exists.
2. The time value of money
There are various ways that money can be used. Some examples are buying investments, creating businesses, and other activities that can provide you with another source of income.
Some people say cash is king, some say it isn’t. This will depend on the scenario, your goal, and the use of money or cash. For example, having a huge amount of money when the pandemic occurred made the financially literate people winners as the stock market gave huge discounts. So if you were an investor, that was the perfect time to accumulate stocks as they were discounted and very cheap. On the flipside, as inflation keeps soaring, having cash sitting in the bank with no concrete plans will cause your money to lose value.
So the question is, do you think that cash is still king? For some people, yes. For some, no. What matters the most is the PURPOSE of stockpiling cash. If you have plans that require you to hold a certain amount of money, then cash is king. On the other hand, holding cash for no reason at all will cost you a lot of wasted opportunities along with experiencing the full effects of inflation.
Browser check. (2012). Retrieved from https://www.doe.gov.ph/oil-monitor-4-june-2012?withshield=1
Peso lab – money guide for Filipinos. pesolab.com. (2022, May 25). Retrieved from https://pesolab.com/the-best-savings-accounts-in-the-philippines/
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