[Financial Essay] The Purpose of Saving Money Is Important

One in Three Savings Account Holders Withdraw Early
Purpose-Driven Savings More Effective Than Blindly Saving

[Asia Economy Reporter Kim Min-young] The reporter recently canceled a savings product. It was signed up non-face-to-face through an internet-only bank application (app), with plans to deposit 300,000 won monthly for two years.

After maintaining it for 10 months, the principal reached 3 million won, but the interest received upon early termination was only 5,523 won.

Since it was the end of the year and there were many expenses, with no cash on hand, breaking the savings was the only option. The regret remained that if the savings had been planned more carefully, it would not have been canceled.

It has been found that many people break their savings similarly to the reporter. According to the Financial Supervisory Service, the early termination rate of domestic bank deposits and savings was 35.7% in 2016. This means one out of three people gave up saving money halfway.

The early termination rate for savings was even higher. The rate of breaking savings was 41.7% in 2014, 38.7% in 2015, and 40.8% in 2016, showing about a 40% termination rate each year. The early termination rate for fixed deposits was 28.3% in 2014, 30.8% in 2015, and 33% in 2016.

Why do people fail to reach the maturity of their savings and quit midway? It is because they saved money without a clear purpose.

Usually, when signing up for savings, people consider only the interest rate and the period, such as one or two years. Especially for young adults starting their careers, they tend to start savings after receiving their salary, thinking about the future, and the first thing they consider is the savings period.

Some depositors sign up only for one-year terms, while others enter long-term savings for five years or more.

However, more important than the interest rate or subscription period is the ‘purpose’ of the savings subscription. If the purpose of saving money is clearly defined when subscribing, the probability of early termination decreases.

For example, when signing up for savings with 200,000 won monthly, it is better to have a clear purpose. Setting goals such as a ‘travel savings’ for an overseas trip in two years, savings for buying items like a TV, computer, or bed, or savings for parents’ 60th or 70th birthday celebrations can provide motivation to accumulate money.

Also, designing purposes by age group allows for saving appropriate amounts according to timing and circumstances.

For teenagers, savings can be timed to mature around school graduation or entrance seasons, or they can sign up for long-term savings for university admission.

For people in their 20s or young adults starting their careers, saving money to supplement rent deposits or signing up for savings for their first overseas trip makes them more cautious about accumulating money.

For those in their 30s or 40s, savings for home purchase, children’s tuition fees, or emergency funds for family events can be considered.

For those aged 50 and above, subscribing to savings for retirement preparation or with the purpose of supporting children’s marriage or childbirth can make it easier to endure until maturity.

Of course, it is fundamental not to overstretch by saving at the expense of living expenses, but to set up an appropriate financial plan and accumulate money accordingly.

This content was produced with the assistance of AI translation services.