Last time in the
article, ‘Take the reins on your
finances’ (Click
Here), we spoke about how with effective planning and implementation you
can improve your current financial situation and add money to your pockets.
This week we will be looking on one of the ways in which you can utilize the
extra money you have acquired.
The first thing
that you may as is ‘What exactly is a bank?’ Now this question may seem quite
elementary to many of you but how many of you can give an exact definition of
this frequently spoken word? If you can then that’s great but for those of us
who aren’t exactly sure what it is here is a definition: ‘A bank is financial
establishment that invests money deposited by customers, pays it out when
required, makes loans at interest, and exchanges currency. Banks also provide a
system for easily transferring money from one person or business to another.’
There are many
different banks ranging from commercial banks to building societies as can be
noted in the names of many of our own financial institutions such as ‘Victoria
Mutual Building Society’ or ‘National Commercial Bank’ to name a few.
These institutions though may offer similar services such as depositing and
withdrawal, also offer a variety of different products based on the intention
of the bank and the type of customers it serves.
The banking service
we will be looking at in this article is a bank savings account. A bank savings account is a type
of account designed to simply hold money that you do not need immediate
access to. This type of account serves as a safe place to hold your money for a
later date and so gives you an added sense of security. If you choose this
option, it can be critical part of your financial future.
Let’s look at
example. What if you had $2000 at the end of the month and you simply have no
idea what you’d like to do with it? You could:
a) Walk around with it
until you find something to do with it
b) Do it the old
fashion way and hide it under your mattress or in drawer or another place in
your house; or
c) Take the $2000 and
put it into a savings account
Despite all these
seemingly great choices, the bank is actually your safest bet. Many unfortunate
things can happen if you do the other two. If you walk around with your money
on your person, it can be lost or even stolen. If you leave it at home your
house could burn down with all your savings or you could be robbed. Please
don’t think that we are calling down any ill-fate on anyone. We are mainly
listing some possible unfortunate incidents where all your saving efforts may
be destroyed. Whereas, if the money is in a bank savings account your banking
institution is responsible for the safekeeping of that money. If the bank burns
down, your money won't go with it and any reputable bank will not just lose
your savings.
An added bonus of
using a bank is that you will earn interest on the money you have in your
savings account. The bank pays you a rate of return on the money you have on
your account at the end of each year. Therefore, the bank pays you a little
extra just for being a customer. There are many banks that offer short term
saving options now, so if you are saving towards a specific goal you can put
the money in a bank and earn a good amount of interest and then withdraw your
money from the bank with minimum hassle.
Another positive of
using a bank savings account is the ease with which you have access to your
money, especially with the use of ATM debit cards and a pre-paid credit card as
is being offered by the Bank of Nova Scotia. The use of an ATM card may
sometimes be a disadvantage as there is usually a limit on the amount of cash
you can access from your account per day, so if you want a large sum of money you
may have to go to the bank itself. There are also usually fees for the
withdrawal of funds in the account, though these are minimal and there are
institutions such as the Jamaica National Building Society that offers no
charge on the withdrawal of funds at JNBS ATM machines or use at a point of
sale clerk for their customers.
Despite, all the benefits of using a bank, there are still some
drawbacks. Banks frequently use different methods to calculate interest.
Therefore, even though everyone receives interest on their money, the interests
vary and some may be rewarded with more money than others. Machines may fail
and as mentioned earlier ATMs have limits, therefore, if it is a case where you
need the money urgently or in cases of emergency you may be in a financial
bind. Also, the tax and inflation rates that may be placed on your account may
dip heavily into your savings. Thus it is imperative that before you open an
account with an institution you do some amount of research and find out how
they can work for you.
