by Glory, the Money Maestro
You probably heard the slogan for good money management “make all you can, save all you can”, “give all you can” as a young person and took it to heart. After slogging it out in the university for five years, you emerged with the converted Bachelor’s degree. One more year of slave labour as an NYSC corps member, six nail-biting mouths in the job market, and presto! You have a job.
You’re making all you can, and you want to save all you can so that you can give all you can to your dependants – the countless siblings and cousins who hound you for money constantly.
Unfortunately your plans to acquire riches and respectability have been stymied by the dismal state of the stock market. You’re no investment jock and, apart from the Stock Market, you have limited ideas as to how to build a nest egg. Fear not, find your way to the right place; The Bank.
Yes, old fashioned savings account is still a viable option for saving money. Practice the following tips to keep your savings account green and ‘liquid’.
Be Ye Separate
Maintain a saving account separate from your salary account. At the end of the month, when you get paid,, transfer the amount you want to save into your savings account. This prevents you from eating into your savings in the course of the month.
Don’t expect easy access to your savings if you want to ear handsome profits. Generally, the more accessible your money, the lower the interest rate tends to be. If you want 24hour a day access to your savings, via an ATM Machine, the ability to write cheques or easy access to a bank branch, expect lower returns, often as low as a tiny fraction of one percent.
Go into Hibernation
Tying up your money for a period is the only way of guaranteeing a known interest rate. Some banks offer fixed rate accounts, but you have to be willing to tie up your money for a set period of time.
Follow the Money
You have to be nifty to get the best rate but often sleep back to average, to mediocrity of to downright rip-off-levels. So you have to be ready to move up your money to chase the top deals.
If you are ready to give notice before withdrawing money, you should be ready to give more.
The Bigger, the Better
Larger amounts tend to attract better interest rates- it can be worthwhile for a savings account per 0.5 percent more if you keep 50,000 rather than 5,000 in an account.
Go for the Underdog
Lesser known banks often pay more. But always check that your savings are covered by a compensation scheme if there is a problem. Banks can, and do go bust. There is the Deposit Insurance Corporation for Nigerian account holders; off sure accounts may have no such safety yet.
Shine your Eye
Not all accounts are what they seem. Some ‘instant access’ accounts offer high rates but only allow instant access on two or three occasions a year. Otherwise, savers have to pay a penalty. Interest rates might be boosted by ‘bonuses’ which are withdrawn after a period.
With over 2obanks and more than 50accounts you can find exception of these rules. But it is always worth asking why an account with certain features is much better – or worse – than similar offerings from rivals. It might often be due to hidden, small print details.
When in doubt, talk to your accountant, banker or financial adviser. Y!
This article was published in Y! Africa magazine issue 2 | 2010