With different innovative products from banks, it is becoming increasingly possible to achieve a set target over a specific period.
For instance, if you are trying to save money for a postgraduate degree; acquire a major property; or even organise a big wedding ceremony at a specific time in future, getting a special target account could help you achieve this objective.
With a special account, a depositor can gradually save and earn some interest on the account. And a major feature is that the depositor must open the account with a minimum balance, which must be maintained over a specific period.
A report published online by blog.penfed.org provides some tips on how to save with a bank account to achieve a set target.
Be specific about your goals, not “I want to have a rainy day fund for things like car repairs” but “I’m aiming for N100,000 in my emergency fund.” Then, you can choose a savings method that suits the amount you have and the goal you are trying to meet.
Short-term savings methods such as interest-earning accounts, regular savings (or share) accounts form the foundation of your financial well-being. They let you earn solid returns on your money without making it inaccessible over the long haul.
Basic savings accounts let you withdraw money whenever you need it (up to half a dozen times per month) while still earning respectable interest. Even the most humble savings plan builds tangible results over time. And by saving first and paying cash for major purchases, you will avoid the risk and responsibility of credit card debt.
When you are saving towards a short-term goal, avoid long-term certificates and investments that hit you with stiff penalties for early withdrawals. You need to be able to use your money at a moment’s notice, whether you are gunning for a new apartment or building a secure emergency fund.
Paying off debt is a top priority for almost everyone, but sometimes saving money takes precedence even over that. Building a solid emergency fund prevents life’s little emergencies from dragging you further into debt. Creating a rainy day fund should always be a top priority.
When you have years to work on long-term goals like a college fund, you can trade easy access to your money for an account that charges a stiff penalty for early withdrawals but rewards you with more substantial returns. Time is on your side here, and even a modest monthly contribution will grow impressively over the years.
You can preserve your ability to access your money without early withdrawal penalties by building a certificate ladder. Buy overlapping certificates with different maturity dates to get penalty-free access to some portion of your nest egg at regular intervals.
The best way to start saving is to nail down specific goals that matter to you. The sooner you start, the more time your money has to grow and even modest savings will swell to a respectable nest egg, given time.
Create a monthly budget and figure out how much you can afford to set aside for savings each month. Then look at the accounts that will earn you the most interest without penalising for getting to your money if you need it.
Remove the hassle by making saving a simple set-it-and-forget-it proposition. Direct deposit, payroll deductions and automatic transfers make it easy to keep your nest egg growing without any action on your part. When you don’t see the money to begin with, you are not likely to miss it, making the process of saving absolutely painless. You won’t even have to think about your savings until you need it and there, it will be, ready to help you achieve your dreams.