There has been much talk about the importance of having savings accounts. Also, there are so many options out there nowadays, especially with fintech companies coming onto the scene. One important option to consider is fixed savings, i.e., a low-risk savings option which allows you to set aside an amount of money that you cannot access for a pre-determined period (called tenure) at an agreed interest rate.
We will look at some of the reasons one should consider having a fixed savings account.
1. Provides a lock-in period
Savings is still a foreign concept to many, and some see it as something to do when you have enough money. For others, the problem is not in the act of saving, but that they can so quickly dip their hands into the savings. This is where having a fixed savings account plays a beautiful role in helping people save without having to touch their money so quickly and on a whim.
The money is locked for a specified period, and cannot be withdrawn, transferred, or used to purchase things online.
2. Financial security
We live in tumultuous times. The year 2020 taught us that unexpected things can happen that can change the trajectory of our lives. Being financially secure is no longer something to joke with, making it the top reason why fixed savings is a big deal in Nigeria.
The nature of fixed savings as a financial instrument is what draws people to fixed savings. It does not depend on the general financial market’s movements, which are often volatile. Instead, it stays fixed at the rate you agreed upon when signing up for it, making it the best option for risk-averse individuals.
3. Higher returns on savings
Compared to regular savings, fixed deposit savings generate higher returns. This is good news, especially with inflation causing an increase in the price of everything. In addition, the exchange rate is not looking great for Nigerian entrepreneurs and consumers, with people having to pay more for goods. However, having a fixed deposit savings means you have some funds that generate more interest than the regular savings.
When emergencies occur, you sometimes need access to money that you have kept aside. A fixed deposit account gives you the option of withdrawing your money before maturity. Though you might be charged a fee for doing so, at least you will be able to get access to your saved funds.
5. Choice of terms
One advantage of the fixed savings is choosing when you want to receive the interest from your savings. If you are not in a bind and don’t need money immediately, you should probably go for the cumulative interest option. Here, the interest is compounded and paid along with the principal at maturity. The benefit of this option is that it offers a higher interest rate compared to the non-cumulative option.
However, for those who occasionally need some money for emergencies or to meet urgent needs, the non-cumulative fixed deposit is a better option. This is because interest payouts are offered at certain intervals during the year: monthly, quarterly, semi-annually or annually. The interest is paid to the individuals at the agreed time. One easy platform to start your fixed savings is Ceepass Digital Bank. You can get your bank account and start saving in just 5 minutes. Sign up here