Saving is a much-celebrated financial principle in the economic world and all and sundry are encouraged to save their hard-earned cash in a bank for safekeeping. These principles are not bad in themselves because saving in a bank for one thing allows one to have the ability to easily access cash in the case of an emergency. Asides from this, knowing that money safe in the bank reduces stress your levels and fear of robbery of any form.
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The proponents of saving cash in the bank advise that you open a special savings account labelled, “build wealth fund” or your “freedom fund” and in reality, these saving techniques work wonders, but not in Nigeria. According to the q1 financial report of Nigeria for 2021, the inflation rate in the country by March rose up to a whopping 18.3%. The inflation on food moved up to a little above 222% despite the financial plugin agriculture of NGN1.5tn by the CBN.
What this means to a layman is that your NGN33,000 can sit safely in the bank and after one month you can only afford half of what you would usually buy in the market. This is because, while your money remains safe and untouched, the market value of things doubled. It is, therefore, wiser to buy the things you want to buy right now rather than letting the money lose value in the bank.
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Another argument comes from “European” professionals and a myth sold by banks is that one can get a certain percentage of interest on money saved. This allows a bank customer to withdraw more than they deposited. The regular interest rate is 1.2% per annum which means that when one saves the minimum wage in a bank and leaves it untouched for a year, they would only get NGN330 as interest. When one now subtracts all the debit on SMS and stamp duty, one should expect less than the initial deposit by the end of the year. However, as of June 2021, the Central Bank of Nigeria introduced the “High Yield” accounts that offer interest rates up to 3.5% per annum which bring our layman interest on his minimum wage to NGN990 per year. Taking that interest to the market, the price of oil moved up from NGN750 as of December 2020 to NGN1, 700 as of June 2021, and there goes the layman interest. Not to talk about the purchase of rice and other staples.
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The principle of savings is not bad in itself, it is indeed a very good financial technique to build wealth. This works unhindered in countries with stable monetary rates and dependable economic growth. What this means is that regardless of how much is sitting in the bank, the overall economy of the country is doing so well that even without interest, and the purchasing power remains the same.
Do you want to save your way to wealth in Nigeria? Think twice and explore options like investments that give about 20% per year. If you do not understand investments, they are numerous apps that offer savings account with as much as 10% per annum.
From the editorial team, cheers to your future wealth!
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