DO YOU HAVE SAVINGS
ACCOUNT
We all have savings accounts, or we think we
do. We have an account which is not a checking account, where we deposit the
money we put aside as savings. So far so good. The snag is, what is the account
balance? For most, it is close to minimum balance. Many have gone dormant. In a
flash of inspiration, you finally started to save, put money aside a month or
two, and then started de-saving, taking it all back. In effect, you are back to
square one.
There are different types of savings accounts.
They can be broadly categorized into two – saving to keep and saving to spend.
Under saving to keep are saving for investment, saving for business start up,
school or house down payment, saving for emergencies, a personal reserve fund
(typically 2 -6 months take home pay), saving for children’s college education
etc. The saving to spend include but not limited to – saving to furnish your
house and other ticket household items, car etc, saving for vacation, saving
for wedding, parties etc. You put the money aside, but it is meant for
spending.
We seem to be more used to the savings to
spend variety. It seems our savings accounts are hostile to having money in it.
The moment money seems to be gathering, there seems to be unease, until we find
what to spend the money on. Suze Orman in one of her books suggested repenting
and opening a new account, if your present savings account cannot hold unto
money. I tend to agree, although it does not always work, and also, if you are
really repentant, you can make your present savings account become a savings
account indeed.
Before you start saving, it is very useful to
decide upfront what the purpose of the saving is, and your target or goal for
that saving account. How much are you aiming for? N500K, N10M? The next step is
to decide how much you will deposit in that account every month. It is better
to start small and increase the amount down the road, than start big and give
up. Consistency is crucial. When you save every month, it means your saving
grows every month. It is a good feeling when you see your savings grow steadily
towards your financial goal or target for that account.
The direction of cash flow with respect to a
savings account, especially saving to keep should be a one way traffic. Cash should
flow towards the account, not away from it. That is why it does not make sense
to have a debit card for your savings account. Your savings account should be
ATM proof. If you are fond of misplacing important documents like me, the one
you should misplace should be your savings account withdrawal booklet. It
should be out of sight. Your deposit booklet should be your best friend. It
takes some doing to get used to having a financial need but taking your eyes
off the money in your emergency savings account. It is misappropriation of
funds to borrow from a school fees savings account to repair your car. It is
illegal and you can go for jail for it. Actually you are in financial jail if
all your savings account has nothing in it.
Saving money does not mean you should not give
to others or help others in need. You should have a budget for giving etc, but
saving should come first after taxes and tithes, before spending. This means
you pay yourself first. Give to yourself first
before you give to others, including the owners of the grocery store. If you
cultivate the mindset and habit of paying yourself first, you will have enough
capital to invest and increase your cash flow, and have a buffer against
emergencies, which vary from unexpected repairs to losing your job. You become
secure financially.
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Do you really have a savings account?