A savings account is generally an interest-bearing operated by banks for their customers. This account usually pays a moderate interest rate, but the safety of the principal makes it a good alternative for parking up cash for short term needs such as education costs, paying of bills or even investing. Money saved is relatively easy to access, the account holder however is not unlimited as to the number of withdrawals they can make within a specified period.
The flexibility and ease of access of a savings account is in return for the comparatively shy interest rate.
How The Account Works
Practically, every bank in Ghana operates a savings account. This is mostly because funds generated from the money saved by customers of a bank can be reused for profitable ventures by the banks such as loaning them out.
Unless otherwise stated, the interest on savings account varies from time to time, ranging from as little as 0.5 per cent to 2.5 per cent in most cases, depending on the amount of money you save and the bracket it falls within. It is rare for banks or other financial institutions to offer a high interest rate on savings account, and such situations are worth investigating. Some banks even prefer not to disclose the amount of interest they give on a savings account.
In most cases, banks require a specified minimum balance (mostly GH¢20 to GH¢50) and a specified initial deposit as well.
One can make deposits directly at the bank, or opt for mobile banking services which may come at a fee. Mostly there are no limits to the amount that can be deposited after the initial deposit has been made.
Withdrawals can also be made directly at the bank or through an ATM( which comes at a fee), credit transfers or mobile banking services.
Importance of Savings Account
Savings account gives you the opportunity to park up money that is separate from your everyday needs. The security of your money also makes it a more ideal option than keeping money under your mattress, or burying it.
Also, you get the chance to earn interest on your amount saved. This little amount earned is quite satisfying, at least, than parking up unneeded money in your current account which will instead attract charges.
Holding a savings account at the same bank as your primary current or checking account can be very convenient and has some efficiency benefits too; transfers are usually simple, deposits or withdrawals to your savings account from your current account can be done instantly. Also, when a few petty or recurring expenses come knocking, it is very easy to move some of the funds from your savings account to your checking account.
Since several banks allow customers to open multiple savings accounts, it is fairly easy to keep track of savings for different goals.
Disadvantages of a Savings Account
The trade-off for a savings account’s ease of access is that it doesn’t pay much as interest. To make matters worse, banks charge customers for ease of access services such as ATM and Mobile Banking services. Also, upon the closure of your account, some banks will require you to leave some amount in the account. It would be more profitable to invest in Fixed Deposits, Treasury Bills, stocks, or bonds (if you have a long term investment need).
Also, the flexibility of access to your money, though is beneficial, can be a drawback too. This is because the account holder is tempted to spend what has been saved by making regular withdrawals.
The savings account is not the best option for funds for which regular use is required of. This is because of the limitation to the number of withdrawals that can be made. In most banks and financial institutions, the number of withdrawals that can be made does not exceed eight (8), and if your expenses or needs involve the regular outflow of money, then you might rethink your choice of a savings account.
Most banks offer little interest on savings accounts as bankers believe that the savings account should not be opened with the intention to make extra money. However, there are other banks and credit unions, especially the ones that operate online, who offer a fair interest on savings as well. Such banks may not have physical premises and therefore spend less on overhead costs, giving them the ability to offer good interest on their savings accounts.
It is very important to shop around to find the most or comfortable savings account, being mindful that some savings account have features that can curtail or even drain your earnings. Some banks, in promotions, advertise savings account with attractive rates, but these rates may only be for a short period of time. Even worse are the ones that cut fees into the interest you earn monthly in addition to charges for an ATM and Mobile Banking (SMS) services.
To open a savings account, simply walk into the preferred financial institution with a valid national ID, and a TIN number (if any), and follow the procedure from there onwards.
Moreover, if your aim is to profit from your money at the bank, you might as well look out for some investment vehicles as Mutual Funds, Fixed Deposit, Treasury Bills, Stocks and Bonds.