Disadvantages of saving money in the bank

Posted by Felix Okoli on Thursday March 20, 2014 at 13:5:23:

Saving money in the Bank is a norm these days in our Society, after all that is the main reason for the existence of Banks. People prefer saving their money in the Bank because they feel that it is safer there. What these People don’t know is that keeping money in the Bank, and allowing it lie dormant in their Bank account is more of a disadvantage to them. I know most People will not believe this, but this article will help you see some major disadvantages that are associated with saving money in the Bank.

5 Disadvantages of saving money in the bank:
=================
1. Low Interest Rate: Though some banks add some interest depending on the type of account you opened with them, for instance Fixed Deposit account, but the interest your money will generate when you save it in the Bank will be very small when compared to the amount it would have generated if it was invested. Instead of allowing your money to lie dormant in a Bank account, it is better to invest it on other things and make more money.

2. Loss in value: The time value of money concept doesn't favour saving money in the bank. If the money has been invested in some other income generating asset, it could have generated more value than being tied down in a bank. The value N5,000 had 10 years ago is not the same value it has today. Leaving an amount of money in the bank as savings for a long will depreciates the value in the long term since it is not really productive

3. Unavailability of cash in times of emergencies: Saving your money in the Bank especially with a Fixed Deposit account makes the money unavailable during emergency periods. For instance, if you have a sick Child at home that requires immediate medical attention, you can‘t just work into the Bank to demand for your money if you saved it with a Fixed Deposit account. Most Banks requires about 3 weeks to process your money before paying you.

4. Difficulty to Recover Your Savings in times of bankruptcy: It has been happening over the years, and it still happens these days, A Bank that can no longer meet its financial obligation has no other option than to file for Bankruptcy, and when that happens, it is always very difficult for Customers to recover their Savings from such Banks. The only remedy to this situation will be if a bigger Financial Institution merges or buys off the Bank and takes over both their Assets and Liabilities. The new Company can decide to pay off old Customers their Money. Even when they agree to pay, it takes a long period of time for the payment to be executed. However most banks are also insured to a certain limit and this would be able to cover some of the money saved by customers.

5. Bank fees and govt taxes: Nowadays, modern banks have also introduced a lot of fees that may be a bit hidden to the passive customer and this only ends up depleting the funds of the customer. Govt also taxes savings account in certain countries and at certain times in order to generate funds for the country. They are taxes payable on interest earned for saving and govt may also decide to tax funds in a bank if they want to.

This article has pointed out four major disadvantages of saving money in the Bank. In conclusion, its not as if I am against People saving their money in the Bank, because saving money helps People curtain excessive spending and save for rainy days, the issue is that instead of saving the money In the bank and leaving it dormant there, the Person can invest the money to other ventures that will yield profits.