Start Saving

Saving is an essential step to achieving your financial goals. Saving is not spending all your money now, but instead, setting some of it aside for a future point in your life.Saving is all about having something for later, when you may really need it.

Why save?

The primary reason to save is to be prepared for emergencies. Having savings can provide peace of mind, knowing you have a cushion against the unexpected shocks that are always lurking around the corner in our lives.

Having savings may be the difference between being able to cope with a financial emergency or not. It may mean not having to borrow money in an emergency and avoiding all the extra expenses involved with paying off a loan, and the restrictions on your budget that follow.

• Flexibility Having savings may open up possibilities that just would not be available to you otherwise. For example, a great investment offer may present itself, or something you were planning to purchase may suddenly be discounted. Having savings may allow you to take advantage of the opportunity.
• Be the Boss (of your money) One of the opportunities that people without savings miss is the chance to be the boss of their money. Instead of working for your money, when you accumulate savings, you can start investing excess funds, and send your money out to work for you.I want to save, but …Most people know what saving is and why it is important. Still, many people struggle with it. This is especially true for people who are attempting to save for the first time. Saving is like everything else, the more you do it, the easier it becomes, so do not be discouraged if you slip up when you start. Keep trying and it will become a habit.There are many reasons why saving may be a challenge. Many people, for example, simply do not believe they make enough money to save anything. For many, the challenge is resisting the need to spend everything they earn right away.Despite these and other challenges, there are people from all sorts of backgrounds and in all sorts of different financial situations who commit to saving to make their lives better, and who find a way to do it, no matter what!

  If you think you’re not earning enough to save anything, go back to your budget and the budgeting tips in this booklet to see where you can change your spending habits, cut expenses, or earn more income to start saving. Remember when preparing your budget to always pay yourself first (set aside your savings first).And remember, if you stick with it, you’ll get better at it, and be better-off because of it.

  How much should I save?

  Many experts suggest setting aside at least three to six months of your current salary aside for your emergency fund.

  Where can I save?

  Some of the more common savings options are listed below.

• Savings accounts/deposit accounts These accounts allow deposits and withdrawals at any time, but do not allow the account holder to write cheques on them. They pay interest on deposits, though this is usually a small amount.
• Checking Accounts This type of account allows deposits and for account holders to write cheques, which are instructions to the bank to pay another person from the funds deposited into the account. Some of these accounts pay interest while others do not.
• Fixed Deposits/Time Deposits Also known as certificates of deposit, these deposits pay interest for a specified period of time. The interest is usually paid at the end of the deposit’s life (at maturity). The interest the deposit will pay may be fixed at a particular rate at the outset or may vary over the life of the deposit.
• Remember fees Regardless of the tool you used to help you save (savings account, checking account or fixed deposit), watch out for fees. Although financial institutions may offer interest on certain types of deposits, fees can quickly eat up all the interest you earn, and then some. Banks may charge for transactions like withdrawals, or even for not meeting a required deposit level.Commercial Banks and Co-operative Credit Unions

  Many of the savings options above are available at both commercial banks and co-operative credit unions. Both types of financial institution are supervised by the Central Bank of The Bahamas.

  Are My Deposits Insured?

  Banks who are members of the Deposit Insurance Corporation (DIC) offer some additional safety for your deposits. The DIC insures savings accounts with member banks for up to B$50,000 per depositor in case the bank is unable to pay you back your deposit. Once a bank is licensed to accept Bahamian Dollar deposits, membership in the DIC is compulsory and you are automatically insured. You do not need to apply.

  For more information, or to see if the financial institution you want to deposit funds to is a part of the DIC, visit the DIC’s website at www.dic.bs.

Understanding Inflation

Have you heard a story from a parent or grandparent about how inexpensive things ‘used to be’? They are right. In your lifetime, you may have noticed an increase in the cost of everyday expenses, like bus transportation, for example. In 1986, the cost of a typical bus ride was 50 cents.Today, that cost has more than doubled. The 10-cent cup of coffee is a distant memory. Typically, money loses value over time because the price of goods and services generally increases over time.

This rise in price is known as inflation. To put it simply, inflation means that a dollar will not buy as much in the future as it does in the present.

As a result of inflation, even when money earns interest, it still may not be able to buy the same amount of goods or services it did before. Put another way, itloses its purchasing power. For example, if your savings account is paying 1 percent interest every year, but the inflation rate is 2 percent every year, your savings may grow but will actually be worth less and lessover time, in terms of what you can do with that money.

Therefore, while savings are essential to financial planning and well-being, savings are not the ideal means for building wealth. Investments, while not generally as safe as savings, can offer a path to beat inflation and truly build your wealth.