Short-term savings

As we are at the beginning of the new year of 2019, it is paramount for us to focus our efforts into our plan for the entire year. Having a plan not only has you thinking of exactly what you want to achieve but it is also a way of practically materialising those goals in a manner which you can track your progress. This starts with identifying the most important goals you want to achieve for this year, which could be saving up to buy a plot, put down a deposit to buy or build a house, buy a car, improve your standard of living or even saving up towards school fees for your children next year. Be mindful to have a short list to focus on as we can’t do everything at once.

Our financial planning topic for this week is SHORT-TERM SAVINGS. The definition describes savings accumulated over a period of less than 12 months. As this is a narrow window of time, an effective way of accumulating your savings is through savings accounts offered by banks.

There are several banks that offer savings accounts around the country.

What to look out for when choosing a savings account

I have had the opportunity to do my own research to find the most cost-effective savings accounts in the country. But, there is still room for personal preferences that would vary your suitability with these accounts and their banks.

The first thing you look at when seeking a savings account, is what most of us do, which is to find the one that offers the highest Interest Rate. That is good however, most of us just end there which can create a few problems later as you progress into the year.

The second thing to look at is the costs that come with the account. Some savings accounts have Account Opening Fees, Monthly Charges, Transactional Fees, and Other Service Fees. Be mindful of these costs as they will eat into the interest rate that attracted us in the first place. (hint: the banks offering the highest interest rates for their savings accounts don’t always give you the highest overall interest rates at the end of 12 months)

You can search the banks’ websites or pay them a visit to ask for brochures to acquire the above rates. You may also seek advice from professionals, such as myself, with independence not restricted nor influenced by companies and their products.

With the option to do your own research, you may use the following simple calculations for comparison:

• (Amount of money you plan to save) x (Frequency you plan to save in the year: weekly, monthly, etc) = [Total savings]
• [Total savings] + ( [Total savings] x [savings account interest rate] ) = [Expected total savings]
• [Expected total savings] – [other service fees] = [Real total expected savings]
• Compare the [Real total expected savings] of all the savings accounts that interested you

Now that we have identified which savings accounts give us the overall satisfactory interest rates to hope for at the end of our year, we can now consider our current banking status and personal preferences. Factors to consider regarding our banking status and personal preferences include where we currently bank versus the bank that offers the savings account we want. At times the bank is same and other times it is not the same. If it is not the same bank, we can consider if we would be making manual deposits (consider transport efforts) or debit orders (consider charges). Other factors to consider include freedom to deposit at any time, your long term financial plan (3, 5, 10+ years) which could include a future loan as it would be an advantage to stay with the same bank, as well as phone and internet banking services among others.

A savings habit requires dedication, discipline, and patience. May you find a savings account that suits you best using all the above considerations. All the best with achieving your goals for this year and using savings accounts as way to reach them.

(Side note from Author: I wrote this article as an RFP? (Financial Planning Professional) and First Publish Date was 27 January 2019 by The Patriot on Sunday Newspaper)