Why Nigerians save money in Banks

Posted by Kenechi on Thursday July 7, 2016 at 9:0:32:

The goal of saving money is to not only store, but also to increase both the total sum and the value of money. Once a person earns income, options are available to either keep cash at home, keep in the bank, or invest it in some other way. There are a number of reasons why a Nigerian would save his or her money in a bank.

To Guard against loss of value
Different banks have different interest rates for a savings account. That being said, the inflation rate concerning the nation’s economy is a factor to be taken into consideration for those that are looking to increase not just the sum total, but also the VALUE of their money over a period of time. While the inflation rate (now officially at 11.4%) usually is higher than banks’ interest rates, there is still a major advantage in keeping money in a savings account versus storing it at home. For example, a bank’s interest rate could be at 8%, and the inflation rate around 11% over 12 months. A brand new T-shirt might be N2,000. If you invested this money at 8%, after 12 months you would have N2,160. At 11% inflation, the same shirt that was N2,000 12 months ago would now be N2,220.If you left your original N2000 at home without investing it you would have the exact same amount 12 months later. So the shirt is now N2,200 but you have N2,160 in the bank which is closer and less depreciated than the un-invested N2000 at home. Your money is at a greater sum and value in the bank. Prices of goods and services usually go up, not down. For this reason it is advisable to put your money in the bank if you have no other place to invest it such as starting a small business or buying appreciable property like land.

To offer Protection from theft
Money kept in the house is liable to being stolen. Someone from within the household could be a thief, or armed robbers could manoeuver their way in. This problem does not exist when money is saved in a bank. Even if bank robbers succeed (which they sometimes do), your money in the bank is still protected by the bank’s insurance and therefore remains safe.

To gain FDA advantage
A Fixed Deposit Account (FDA) is a situation where a fixed amount of money is deposited into a special account, which is paid back at a specified date into your main account at a high interest rate. This rate is usually far higher than that of a regular savings account, but there is always a minimum investment requirement, ranging from either N1m, N500K, or as low as N100K depending on the bank. If you have the funds, this is a good way to capitalize and boost savings, which many Nigerians have been doing for years.

To Enforce discipline
When your money is in the bank, there is some degree of restricted access as opposed to having immediate cash at hand. This encourages self-discipline in spending habits, and leads to greater long-term savings.