A savings account may sound plain vanilla, but they come in many different flavours.
So when choosing a place to stash your savings, it pays to shop around. Fees, minimum balances and interest rates vary widely — and nearly all of the 24-plus banks in Nigeria offer these accounts.
In a low-interest world, every little bit of interest helps, according to Bankrate.com.
Yet, savings accounts are essential ways to fund unexpected expenses like dental bills or car repairs, the United States Consumer Federation report says. So, any savings feature that helps you save more money is a must-have, says Kelley Long, a financial expert.
She counsels savers to start with small amounts of money. The rule of thumb is to save 10 per cent of your income, she says.
According to www.bankrate.com, experts advise savers to keep these seven tips in mind to find the best savings account.
- Make savings transfers automatic
Automatic transfers are the only effective way to save money over time, says Steve Brobeck, executive director of the Consumer Federation of America. “Most people don’t have the time or discipline to make regular contributions to savings on their own,” he says.
As a free service, many banks will transfer a fixed amount of money — as low as N2,000 — from your current to your savings every month.
Some banks even offer auto-saver incentives such as higher interest rates or cash bonuses.
- Use mobile cheque deposits
Once an unknown, mobile deposits are quickly becoming must-have features. This will soon begin to be offered by banks in Nigeria. Sixty-four per cent of the top 25 banks in the US now offer these handy deposits, according to Javelin Strategy and Research. Many credit unions in the US also offer them. The lure is simplicity. You merely snap a picture of a cheque with your smartphone and deposit it using your bank’s downloadable mobile banking app.
These mobile deposits can help you add money to a savings account right away. “You may not be near a bank branch to deposit a cheque,” adds Greg McBride, CFA, senior financial analyst at Bankrate.com.
- Avoid monthly fees
Monthly savings account fees can vary widely, according to the US Consumer Federation. But they can quickly add up.
“Make sure you understand any fees that come with the account,” says Clare Levison, a banking expert. “Those fees can eat away at your interest rate.”
One frequent fee to avoid: the minimum balance penalty.
Many banks also charge another more unexpected fee for inactivity. This happens when a person doesn’t make any deposits or withdrawals over time. If there are no emergency withdrawals, you may be whacked with inactivity fees; so it pays to note them, Brobeck says.
- Liquidity matters
Being able to easily access your money through online transfers, ATM withdrawals or bank tellers is a must-have savings feature, McBride says. The reason: You may need that money quickly for emergencies. So, when looking for a savings account, ask about your bank’s withdrawal policy, too, Brobeck says.
- Seek out competitive rates
Given today’s low interest rates, it pays to shop around for an account, Levison says.
Online banks are one place to look, Levison says. Big banks typically pay lower interest rates, Brobeck says.
- Opt for online savings
More banks are offering free online tools for the savings challenge. “These tools are important,” Levison says. “They help keep you on track.”
For example, Buffalo, New York-based First Niagara Bank, has an online savings growth calculator, which estimates the future value of your savings based on your contributions. And Wells Fargo has the My Savings Plan online tool that lets you label your goals and track your progress.