[Practical Finance] "No to Sleepless High-Risk! Let's Reconsider Savings and Deposits OK!"

Bitter Experience After Jumping Into Stocks Amid Continued Market Crash
Growing Interest in Safe Lump Sum Savings

Compound Interest Savings and Funds Targeting 2030
Launch of Fun and Innovative Products for Saving

[Asia Economy Reporter Sim Nayoung] #Three years ago, Lee Ji-som (28), who was employed at a mid-sized company, visited her main bank to consult about a savings product suitable for her monthly salary. As an office worker earning about the average salary for her peers, her life was not difficult, but after spending on living expenses and paying rent, she was worried because there was little money left in hand. Lee said, "Real estate is a huge mountain for people in their 20s. To move from monthly rent to a jeonse (key money deposit) lease, you need seed money."

Banks are focusing on savings, installment savings, and fund products targeting young adults in their 20s and 30s who are just starting their careers. After the COVID-19 pandemic, central banks worldwide injected liquidity, leading many young Koreans to jump into the stock market, but they were discouraged by the market crash from the second half of last year through the first half of this year. Turning away from the stock market, young people are choosing bank products as a safe way to accumulate a lump sum. The Youth Hope Savings product launched by the government in February was also very popular for this reason. Banks are also releasing creative installment savings products that make young people enjoy saving small amounts to build a lump sum.

Compound Interest Applied for Higher Returns than Simple Interest

KB Kookmin Bank’s flagship product is the ‘KB Kookmin First Financial Planning Installment Savings.’ It is a monthly compound interest savings plan supporting first-time office workers in building their first lump sum, available only to individuals aged 18 to 38. The subscription amount ranges from 10,000 KRW to 300,000 KRW per month, with a contract period of 3 years. It offers preferential interest rates to first-time customers and KB Star Banking transfer users. The annual interest rate ranges from 2.1% to 2.6%.

At Kookmin Bank, anyone aged 14 or older can create a ‘Liiv Pocket’ account through a dedicated application (app) using their mobile phone registered in their name, even without an ID card, to make payments, transfers, and ATM deposits/withdrawals. The ‘Momo Pocket,’ a small savings product exclusive to Liiv Pocket, presents challenge goals familiar to Generation Z (born mid-1990s to early 2000s), such as saving for chicken, helping to cultivate saving habits among Gen Z.

Shinhan Bank will run the ‘My Home Installment Savings Special Interest Rate Event’ from the 16th to December 31, offering an annual interest rate of up to 5.5%. Eligible customers are those who did not have a Shinhan Bank Housing Subscription Savings account within one month before opening a new My Home Installment Savings account, and who subscribe to the Housing Subscription Savings on the day of opening and maintain it until maturity. The eligible age range has also been expanded from under 29 last year to under 39 this year.

On the 31st, as the novel coronavirus infection rapidly spreads mainly in the metropolitan area and social distancing level 2.5 is in effect, the area near Yonsei-ro in Seodaemun-gu, Seoul, shows a quiet scene. Photo by Jinhyung Kang aymsdream@

Shinhan Bank also offers an installment savings product that provides preferential interest rates when users of the delivery app ‘Ttaenggyeoyo’ complete weekly payment missions. Payments can be made once a week for six months, with a monthly limit of 300,000 KRW. After signing up for ‘Ttaenggyeoyo,’ customers must place orders at least three times without requesting disposable items. Upon subscription, after 10 weeks of payments, and at maturity, three 5,000 KRW discount coupons for Ttaenggyeoyo are provided.

Popular Creative Savings Products That Encourage ‘Pretend Purchases’

NH Nonghyup Bank’s ‘NH Satda Chigo Installment Savings,’ launched at the end of March this year, has received a good response. Until a few years ago, many consumers had a YOLO (You Only Live Once) mindset of living to do what they want now, but with the rise of ‘Jjantech’ (frugal tech) young people preparing for the future due to the COVID-19 impact, this idea product was introduced. On the All One Bank page, users can set nine icons related to consumption with desired names and amounts, and when they resist spending, they click the corresponding icon to deposit money, earning preferential interest rates. Within about a month of launch (as of May 2), it recorded 42,035 accounts and a balance of 9.7 billion KRW. Deposits can be made up to 300,000 KRW per month, available to individuals with one account per person. The subscription period can be set monthly between 6 and 12 months. The highest annual interest rate is 3.10%.

Nonghyup’s ‘NH1934 Monthly Compound Interest Installment Savings’ supports youth employment and entrepreneurship. The subscription period ranges from a minimum of 6 months to a maximum of 24 months, with flexible monthly deposits from 10,000 KRW to 500,000 KRW. Meeting preferential conditions such as salary transfer or individual business account performance grants up to 1.5 percentage points additional interest. Graduates of agricultural high schools and young farmer officer schools receive an extra 2.0 percentage points preferential interest. This product offers up to 5.10 percentage points higher preferential interest annually.

Woori Bank’s ‘Twenty-Year-Old Woori Installment Savings’ promotes the concept of building a lump sum for 20s bucket list by lowering the threshold for preferential interest conditions. If a Woori Card payment account is designated as a Woori Bank deposit/withdrawal account and monthly payment performance exceeds 100,000 KRW during the performance recognition period, an additional 0.3 percentage points preferential interest is added. Signing up through Woori Bank’s non-face-to-face channel grants an additional 0.2 percentage points preferential interest. The maximum interest rates are 3.4% annually for 3 years, 3.3% for 2 years, and 3.2% for 1 year.

Consider Income, Investment Tendency, Yield, and Safety

Hana Bank offers a ‘Youth Employee Special Interest Rate’ for new employees aged 35 or younger who subscribe for a 1-year contract and meet both salary transfer and card performance requirements, providing a one-time special interest rate of 1.3% annually per customer. The ‘Hana Soldier Tomorrow Preparation Installment Savings’ is a tax-exempt savings product for those completing military service to prepare a lump sum for social entry, with a maximum interest rate of 5.5% annually.

A bank official said, "Generally, the most recommended saving methods for young workers are subscribing to ‘regular installment savings’ and ‘installment funds.’ Regular installment savings have no principal loss risk but offer low returns, while installment funds can yield higher returns depending on stock and bond markets but carry principal loss risk compared to regular installment savings." Above all, it is important to carefully choose a saving method with an investment concept by comprehensively considering one’s ‘income,’ ‘investment tendency,’ ‘yield,’ ‘safety,’ and ‘timing of fund needs.’

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