DEPOSIT PROTECTION REDUX, TURNING HOPE AND A PRAYER INTO A MILLION
Dear Khun Teera, I believe there could be a mistake in your recent article dated June 24 concerning deposit coverage guarantee thresholds. Please see below.
Facilities covered by the decree of deposits protected by the 2012 Act effective from Aug 11, 2012 are as follows: of the unprotected amount only if funds remain following the liquidation of the financial institution.
I obtained the above information from http://www.dpa.or.th/ewt— news.php?nid=320, which is the Deposit Protection Agency. I would appreciate knowing if it is correct.
— Richard G. Raines
... Teera Phutrakul, CFP, Chairman, TFPA Thank you for pointing this out. I was under the impression the government brought the effective date forward to Aug 11, 2012, but due to political pressure the authorities decided to stay put for now. As things stand, we have until 2016 before the blanket guarantee amount is reduced to 1 million baht.
The whole idea of deposit insurance has been debated at some length, with some arguing government protections help to create banks that become riskimmune and are ‘‘too big to fail’’. With the government assuming increasing portions of risk such as deposit insurance or bailing out the banks when they fail, bankers become increasingly irresponsible, because the risk of failure is transferred to the public domain.
Personally, I am totally against bailing out reckless banks with taxpayers’ money. Sadly, politics often gets in the way, and governments will usually intervene if there is widespread bank failure in order to restore public confidence in the economy.
I think Thailand did the right thing during the 1997 crisis, whereby a prerequisite for government intervention was to wipe out the equity of the banks first before taxpayers’ money was used to protect depositors.
I’m 32 with a 25,000-baht monthly income. I have 60,000 baht in savings, but wish to have 1 million baht before I turn 40. Is that possible? I also give my parents 5,000 baht per month.
— Benjaporn
... Teera Phutrakul, CFP, Chairman, TFPA So you want to know how to turn 60,000 baht into a million in eight years? That’s easy, assuming you can find an investment that yields 45% compounding return per year.
Daydreaming aside, your financial situation is a lot more challenging. Being a dutiful daughter, you are willing to put aside 20% of your salary to look after your parents, which means you are left with only 20,000 baht to make ends meet. Personally, I do not have a lot of respect for these unsuccessful and irresponsible parents that did not work hard when they were young and became a burden to their children.
In any case, with only 20,000 baht to play with, you can still be a millionaire by the time you turn 40 assuming you can set aside 30% of your pay or 6,000 baht a month. By dollar-cost averaging the amount into a well-diversified equity fund with an estimated annual return of 8%, you should be able to hit that million baht target in eight years. This is living proof that anyone can become a millionaire if they have the willpower to work hard and invest intelligently.