[Real-Life Finance] Entering the High-Interest Era, Should I Also Challenge to Become a Savings King?

'Garo Savings' for Lifecycle-Based Distributed Saving
Enjoy Compound Interest Benefits and Financial Management
'Sero Savings' for Rapid Asset Growth
Advantageous for Debt Repayment and Investment Seed Money Formation
Parking Accounts and Spare Change Savings Also Useful for Small Amount Saving

[Asia Economy Reporter Song Seung-seop] As the prolonged era of ultra-low interest rates comes to an end, savings methods and products that can help build assets are gaining attention. This is because the base interest rate hike and the resulting upward trend in deposit interest rates have also increased the expected benefits from savings. Since the advantages and disadvantages vary depending on which products and how money is invested, experts advise building a savings plan tailored to one’s financial situation.

‘Garojocheok’ Enjoying the Magic of Compound Interest

According to the financial sector on the 3rd, content recommending savings methods based on financial situation, personality, and type is gaining popularity on financial communities and economic/financial YouTube channels.

For young adults starting their careers, the ‘Garojocheok’ method is often recommended. Garojocheok is a type of life-cycle diversified savings method. It involves planning for short, medium, and long terms and dividing small amounts to save accordingly. It is advantageous for those saving for various purposes. For example, if saving 1 million KRW, one might save 200,000 KRW for one year for wedding funds, 600,000 KRW for five years for housing funds, and 200,000 KRW for ten years for retirement preparation.

The advantage of using Garojocheok is that even after short-term savings end, medium- and long-term savings continue. Financial management is solidly maintained throughout the life cycle, and by saving over a long period, one can also aim for various tax benefits such as tax exemption. In particular, through the compound interest effect where interest accumulates periodically, one can receive a relatively larger maturity amount even when investing the same amount of money.

For short-term savings, it is important to actively use products that offer high interest rates even with low limits. K Bank, in partnership with Woori Card, offers the ‘Hot Deal Savings x Woori Card’ product. The base interest rate is 1.8%, but depending on card usage, it offers up to 8.2% preferential rate, providing a maximum interest rate of 10%. Targeting special deposit products from secondary financial institutions is also a method. For example, Sangsangin Savings Bank has launched a fixed deposit product with a limit of 200,000 KRW but an annual interest rate of 11%.

For long-term savings, products like pension savings that allow small but steady contributions and offer significant tax benefits are advantageous. Pension savings accounts provide a tax credit rate of 16.5% up to 4 million KRW annually if income requirements are met. Taxes on buying and selling financial assets during the contribution period are also exempted. Since tax savings occur during financial asset management, the compound interest effect of long-term savings can be maximized.

‘Serojocheok’ for Rapid Asset Accumulation

On the other hand, if saving for a single purpose in a short period, the ‘Serojocheok’ method is advantageous. It is usually chosen when preparing housing funds, forming investment seed money, or when there is debt that needs to be repaid quickly. Since Serojocheok involves concentrating a lump sum in a short time, the speed of asset formation is faster compared to Garojocheok. Although it is difficult to enjoy compound interest effects, the uncertainty risk from long-term savings is lower.

The ‘windmill rotation’ method, which involves signing up for fixed-amount savings on a set date each month, is effective for Serojocheok. Windmill rotation is a financial technique where principal and interest are received monthly as the windmill blades turn in sequence. Although it has the drawbacks of managing many accounts and the inconvenience of increasing savings amounts, a lump sum can be received at maturity.

A representative product inspired by this is Kakao Bank’s 26-week savings. It automatically increases the transfer amount weekly by the initial subscription amount. This allows a kind of windmill rotation financial technique within one account. The subscription amount can be freely chosen from 1,000 KRW to 10,000 KRW, and the maturity is six months. A basic interest rate of 1.50% per annum is provided, and a preferential interest rate of 0.5 percentage points is granted upon successful completion of 26 weeks.

If one has a high investment tendency or little interest in savings, using a ‘parking account’ can allow enjoying the advantages of savings efficiently even with small amounts. Parking accounts are often used by customers who prefer secondary financial institutions offering higher interest rates than commercial banks. OK Savings Bank’s ‘OK Parking Daebak Account’ offers a maximum interest rate of 1.7% per annum by applying a preferential interest rate of 0.2 percentage points. Interest is paid monthly, and there are no restrictions on subscription period or conditions. Currently, the accumulated number of subscribers is about 100,000.

Products using a spare change savings method that automatically save small amounts without much attention are also steadily emerging. Welcome Savings Bank offers the ‘Welbang Spare Change Automatic Savings’ that automatically collects spare change accumulated in deposit and withdrawal accounts through simple payments. It offers a high interest rate of up to 4.5% per annum and can accumulate spare change in free deposit and withdrawal accounts of commercial and internet banks.

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