Let’s Talk Savings Account

I know we’ve heard the phrase ‘you need to save part of your income’ so many times that it has become a cliché. But, hopefully we have heeded to this call and we are saving. The most common and easiest way of saving is through a savings account and am sure most of us are familiar with savings accounts. However, for those who aren’t, a savings account is a deposit account held at a retail bank at a specific interest rate however, the monies held cannot be used for day to day transactions. I do commend all of you with one as you have taken the first step to achieving your financial freedom.

However, we don’t have to stop at just saving but take a step forward and start investing that which we have saved.  As it is often said, it’s not about what you earn but what you keep, but even more importantly, where you keep it i.e. what you do with that which you have kept away.

Yes, keeping your money in a savings account has it benefits such as it being a safer route – if held with a credible bank, it’s a very low risk. Basically, the amount in your savings account won’t decrease unless you withdraw your funds. However, savings account has its cons too with the biggest one being that the interest rates offered by banks on savings accounts are too low hence don’t allow your money to grow quickly. Moreover, the interest rates are often lower than the rate of inflation. This means your savings will lose purchasing power over time. For example, if your saved money could feed you and your family for a whole year, few years down the line, the same saved money can only feed you and your family for only 10 months or even less.

A savings account can be fantastic way of putting your money out of your everyday reach and accumulate it for investing. However, I would not recommend holding your money in a savings account for more than 3 months. Find an investment with a higher rate of return than that of inflation even if it’s to hold your monies as you accumulate it for a bigger investment. No matter how little your money is, there is always an investment available. At the end of the day, no-one wants to put their money in a place where it would potentially lose its value.

So, don’t just save, start investing to grow your money!

PS. None of this content is financial or investment advice. It’s for educational purposes only. Please do your own research and/or consult with a professional if you want advice customized to your specific situation.