Bank Savings Deposit is one of the options available to a person that has just started earning and savings. others are:
- Insurance or structure finance products
- Stock and derivative trading
- Long lasting asset (Buying or building a house)
Goals of a starter
The choice of a starter should be driven by the goal for which savings is meant. The goal of every starter however has been seen to be short time in nature, with the objective of
- Funding higher education in in 2 to 3 years
- Buying a car
- Taking a holiday
- Get married or
- Fund the education of a sibling
As a result of this, the investment chosen should be flexible and liquid and protected from too much volatility.
- Insurance and structured savings product are termly and comes with penalty on premature termination.
- It is also not advisable for a o risk an erosion of 20% in a badly termed stock market investment.
- Buying a house or building one is a long term asset that requires future commitment.
- Whereas bank savings deposit offers a higher level of convenience, flexibility and liquidity while earning a steady rate of returns.
Bank savings deposit is easy to understand and transact unlike several other financial product that comes with complex names and are not easily understandable. They also come in different choices details and disclaimers.
Enabling internet access to a salary account will allow you monitor your account. You will also need to request your bank to open a separate bank savings deposit account where you can move fund you want to save without spending from it or have a standing order on your salary account where funds are automatically taken and credited to your savings account.
Other advantage of Bank Savings Deposit Account
- Bank Savings remains the desirable option for a young investor who has just began to deal with money and may not be able to correctly estimate the liquidity requirement risk or the need for investment.
- Savings Deposit also provides a buffer for a youngster who’s job may be at risk owing to current economic recession and provide them the peace needed during the period of searching for another job and not lean on parents.
- Bank savings deposit account can be broken at anytime without formal notice to the banks. It can also be used a s collateral for bank loan and a good interest rate can be negotiated.
Assuming 25% of a monthly salary is saved in a bank in 1 year, 100% of your 4 months salary would have been saved and this multiplied by the number of years you stay in your first job. This will provide the much needed cash accumulation to achieve your short time objectives.
Once you have accumulated bank savings deposit of between 3 to 6 month salary you should be ready to explore other investment. Your choice of investment however should be simple and you should understand the terms clearly.
Most employer often requires fresh employee to open salary account with their bank. The under listed criteria should however guide you in choosing a bank to keep you money in.
- Good technological backbone which supports error-free Internet & mobile transaction as well as alert and quality customer service.
- Your bank should have processes that are established, efficient and fast so you can create a deposit, take a loan or make changes without wasting time and energy.
- Your deposit is a loan to the bank, ensure you lend your money to the bank you are comfortable dealing with and check its reputation and standing.