Financial experts say there are many ways through which people can improve their savings. In this article, SIMON EJEMBI highlights some of the ways
For many people, a savings account is not too different from their wallets or purses. They deposit money into the account today and by tomorrow they withdraw it. While experts say many people are forced to act that way due to the economic challenges in the country, they argue that many people do not make any effort to have a ‘proper’ savings account.
According to them, withdrawing money regularly from the account is one of many other steps that should be avoided if an individual intends to go grow his or her savings accounts.
Of course, it is not a taboo to withdraw money from a savings account as some people use the account to create an emergency fund or keep money for major projects such as buying a car. The problem, however, is when people withdraw money outside the purposes for which the accounts were opened in the first place; more so, when they withdraw regularly.
Some of the ways to boost your savings and to achieve the targets for which the savings account was opened are explained below.
Keep your savings out of reach
Finally, you have developed a savings habit and, consequently, you now have some form of saving. But have you learnt to avoid dipping into the account for purposes other than that which you opened the account? According to experts, this one of the challenge many people have when it comes to growing a savings account. They make their savings accounts very accessible and are therefore easily tempted to withdraw funds from the accounts. They advise people to do their best to ensure that they do not taking money out of the account randomly. To do this, it is advised that people should try to ‘forget’ that they have money somewhere. This is because as long as people are constantly reminded that they have money somewhere, and that it is easily accessible, they are likely to spend the money. It is no surprise that at many seminars or workshop about the contributory pension scheme in the country, one of the frequent questions people ask is whether they can access their pension savings before they retire.
Watch your expenditure
In order for people to save, they are advised to watch their expenditure – to spend less than they earn. Similarly, to grow your savings, you need to spend less than you are spending at the moment. Thanks to technological breakthroughs, there are many tools – online, in mobile phones, etc. – that can be used to help you keep your expenditure in check. All you have to do is to ensure that you document or input all your expenses, say, every month or every week, depending on how regular your income is. At the end of the period, you can review the expenditure to determine what you spend your money on and expenditure you can reduce.
To keep your expenditure in check, experts say budgeting is a must. And it is not just about drafting a budget and dumping it somewhere, you have to stick to the budget. Failure to do this, might see your expenditure rise instead as you will be prone to spontaneous shopping.
Make your savings automatic
Sustaining a savings habit can be a huge challenge for many people. It is common to see people save regularly for months only to stop abruptly for a longer period. Some are inconsistent with their savings, blaming it on economic challenges.
To overcome this challenge, experts advise that people should adopt an automated savings approach. This is would ensure that part of their income is automatically saved.
Many banks and cooperative societies offer products that allows for such an arrangement. Such arrangements would ensure that instead of you receiving your salary and then battling with yourself to push part of it into a savings account, a part of it will be deducted and kept in your savings account while the rest is paid to you.
The amount to be deducted depends on you; it could be N1, 000 or less and it could be N100, 000 or more. The process is similar to what happens with your contributory pension and tax deduction. Just as you get to cope with pension and tax deductions from your salary, experts say you will be able to cope with such a savings plan. It is also a great way to avoid making your savings too accessible.
Control your withdrawal rate
As the Central Bank of Nigeria strives to fully implement its Cash-less policy, the use of automated teller machine cards, online banking platforms and transactions are becoming common. But some of these transactions come with charges. Until recently, it cost N100 to use an ATM card for a particular bank on an ATM belonging to another bank. Already, there is an outcry that some banks are planning to reintroduce charges for the service. Also, online transactions such as money transfers and bill payments now come with more charges for some banks. It is, therefore, important for people to avoid excessive withdrawals as well as unnecessary transactions. Banks may charge just N5 for SMS alerts but for some people, due to excessive withdrawals or transactions, up to N500 or more is deducted from their account every month for the service.
Monitor your account balance
Some people have never demanded an account statement from there bank. While some who have received statements hardly bother to look at them. Such people are likely to be shocked to see someone in a banking hall demanding to see the manager because N100 was deducted from their accounts.
As the chuckle at the sight and assume the man who wants to see the manager over a ‘questionable’ deduction(s) is overreacting, they may be missing an opportunity to take their finances more seriously.
Experts say it is important for people to take note of their account balance, and to always strive to understand the implication of new financial regulation on their accounts and savings.
They stress that in order for people to grow their savings accounts, they need to understand what the interest on their savings is and that it has been or is being paid into their accounts. Similarly, they need to understand the fees they have to pay for transactions and ensure that not more than that amount is deducted or is being deducted.
Choose the right savings account
While the basic services offered by banks are similar, the interest rates they offer and the charges for their services differ. Experts say it is important to choose the right kind of savings account or else it would be difficult to get the desired benefits from your savings.
In choosing a savings account it is important to consider: the interest rate, account charges, minimum and maximum balance and the cost of withdrawals, among other things.