Frugal saving gains popularityKim Wook-jin, a 33-year-old office worker, was recently able to purchase a 600,000 won ($540) bicycle after saving 5,000 won each day for the past four months, money he would have otherwise spent on a cup of coffee.
Encouraged by his success with the bicycle, Kim is now eyeing a 1.6 million won DSLR camera. His goal is to make the purchase next year by cutting back on cigarettes, which cost him about 4,500 won every day. Kim’s fiancee is happy about the plan, too - she’s been trying to convince him to kick his 11-year smoking habit.
When Kim was saving up for the bicycle, he was putting leftover cash from each day into an actual piggy bank. Some days, he would forget to do it and end up depositing a large chunk of cash into the bank later to make up for the lost days.
This time, Kim opened a savings account that automatically receives 4,500 won each day from his main checking account so he doesn’t have to fumble with hard cash.
Such frugal saving is increasingly popular among people in their 20s and 30s who are fresh out of school and just starting their careers. They may not necessarily have the financial means to make bold investments in the stock market, which has been breaking records recently, or in real estate, where home values continue to rise.
So young people are opting to save now in order to make investments later. The idea is to identify a frequent purchase that can easily be given up and remain steadfast in cutting back on the indulgence.
Financial companies have responded to the trend by introducing products that make frugal saving easier and help customers avoid the temptation of giving up. Banks tout their ease of use - most of the savings accounts can be opened within mobile banking apps, sparing customers a visit to a brick-and-mortar branch, and some don’t even require the user to log into an app, instead operating through text message.
One of the most popular products is KEB Hana Bank’s “How Much Is It Today?” account. The bank will send users a text message every day asking how much they want to save. If the person replies back with, say, 5,000 won, the bank will automatically transfer 5,000 won from the customer’s checking account to a savings account. KEB Hana says the financial product helps clients build up frugal habits and cut back on small purchases without giving much thought.
The annual interest on the product is 0.8 percent for a contract of six months. It goes up to 1 percent for 12 months.
The maximum interest on this product is 2.2 percent. A person can set the daily deposit amount as low as 1,000 to 5,000 won. But for those who want to save more, they can also set a monthly deposit of 1 million won.
Rival Shinhan Bank’s version of the product is called “Handalae Piggybank,” where users can put as much as 3,000 won a day and 300,000 won a month into a savings account after downloading the related mobile banking app. One of the product’s biggest benefits is the annual 4 percent interest rate.
Unlike KEB Hana’s product, which asks users each day how much they want to put into their savings account, Shinhan’s piggy bank product is automatic. Customers can set a daily spending limit, and if they end up spending below the limit, the remaining amount is automatically transferred to the savings account.
KB Kookmin Bank recently introduced “Maeil Maeil Savings,” which literally translates to “daily savings.” Customers can sign up for the service on the company’s mobile banking app Liiv and get as much as 0.2 percent additional interest if they fulfill certain missions like saving money for five or 10 days straight.
Lee Dae-pyo, who runs one of the biggest online communities dedicated to frugal saving, has suggested a method in which people can exponentially increase the amount they save by building up a habit. Under his method, a person starts by saving 1,000 won on the first day and then increases it to 2,000 won on the second day, 3,000 won on the third day and so on.
By the end of the month, the daily saving amount will have increased to 30,000 or 31,000 won depending on the month, and total savings will come out to about 496,000 won.
After 12 months, the saver will have pooled together 5.74 million won.
BY CHUNG JIN-WOO [email@example.com]
with the Korea JoongAng Daily
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