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.
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.
Having savings may open up possibilities that just would not be available to you otherwise. For example, a person may find himself in a job that he/she really needs to leave, for whatever reason. Having a few months of salary set aside as savings may allow you to leave and live comfortably while you search for a new job. You probably can think of examples from your own life where you thought, if only I had some cash saved to be able to take advantage of that opportunity.
Be the Boss (of your money)
One of the opportunities that people without savings miss out on is the opportunity 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 they struggle with saving. 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.
If you think you’re not earning enough to save anything, go back to your budget and the budgeting tips given 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 set aside your savings first.
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. Most agree you should aim to have save enough money to cover your monthly expenses for three months.
Where can I save?
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.
This type of account allows deposits and for account holders to write cheques instructing the bank to pay another person from the funds deposited to 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.
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.
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.