Save money and earn high-interest yields in a bank that is stable, secure and reputable.
Can we really trust our banks with our life savings?
Many Kenyan’s over the decades have lost money in the collapse of banks such as Charter House, Euro Bank, Fortune Finance, Trust Bank and many others. And with what happened with Chase Bank and Imperial Bank, there are still some Kenyans feeling jittery about placing the bulk of their savings in banks.
So, let us first define a bank.
A bank is a financial institution that is licensed to receive deposits and make loans. They may also provide services such as wealth management, insurance, currency exchange, and safe deposit boxes. Nowadays, to increase their bottom line, banks are now cutting across offering all these services – or are predominately either in retail or investments.
So, is the Bank STILL A Place to Save Money? Yes. Even with the long list of collapsed banks, banks are still a great place to save money.
Here is why:
Savings Account
Banks still offer great saving accounts that are insured by the Kenya Deposit Insurance Corporation (KDIC) up to a specific limit of KES. 100,000. Established under the Kenya Deposit Insurance Act, 2012, the institution provides and manages deposit insurance. It is also mandated to unwind failed institutions.
Currently, savings accounts offer about 7%+ interest per annum. They may also come with certain restrictions such as withdrawal limits or a service fee if more than the permitted number of monthly transactions occur. Saving accounts come with no access through cheques or ATMs, therefore, they offer customers the discipline needed to accumulate funds.
Banks also offer high yield bank accounts, similar to the standard savings account but offer higher interest rates. A larger initial deposit and limited access is also a common feature. Banks usually offer their valued customers these accounts.
The current market rate on savings is 7%, but here is the bank with the best savings yields:
- KCB Bank claims to provide customers with the best savings yield under their KCB Goal Savings Account. The savings account comes with an annual interest rate of 8.5%. The account has a minimum opening balance of KES 1000. Under this account, KCB requires customers to lock their savings for a minimum period of 6 months and a maximum of five years.
Banks are simply a great and convenient place to save money.
Fixed Deposit Account
A fixed deposit account is essentially a financial instrument provided by commercial banks. It offers a higher rate of interest in comparison to a regular savings account, until a specified given maturity date. A fixed deposit account is very similar to certificates of deposit, if not the same thing, as they are both timed deposits.
Here are some FDs with the best rates in the market:
- Barclays Bank offers a fixed deposit account with an 8% annual return – and its accounts come with a minimum requirement of KES 100,000 deposit per month.
- Standard Chartered Bank‘s fixed deposit account attracts an interest of 8.5%+ per annum. The account has a minimum investment requirement of KES 100,000 for a regular FD. However, for an even higher yield, the bank also has a high yield fixed deposit account with a minimum investment of KES 1M.
- Other banks such as CBA and Stanbic Bank allow customers to negotiate interest upwards, up to 10% – if you have enough money, you can negotiate any rate you want, up to 10% per annum.
Certificates of Deposit (CDs)
Popularly known as time deposits, certificate of deposits are available through banks and are insured through KDIC. Certificates of Deposits require investors to keep money in the CD for a specified amount of time; otherwise, attract a penalty for early withdrawal. Kenyan CDs offer interest rates ranging between 6% – 10% per annum. With CDs, higher interest yields are usually offered to larger and/or longer held deposits. With a minimum deposit of KES 50,000 and a defined period of either 7 days, 1 month, 3 months, 6 months or 1 year, you can have access to this investment option.
Saving with certificates of deposit allows users the opportunity to ladder their CDs. This is where you can divide your savings into equal parts and invest in say, a one-, two- and three-year CD, such that you are not tying up all of your money at once. The varied maturity dates give investors the freedom to reinvest their savings should interest rates rise.
Overall, c.ertficicates of Deposit are a great place to save money.
The Bottom Line
Banks have always offered their customers the convenience of easily saving money while earning modest, low-risk returns. Great saving accounts, fixed deposit accounts, and certificates of deposit are great hustle free options for those looking to save money.
With also the large variety of saving institutions such as SACCOs and Credit Unions, one needs to do a little research to determine the best place to squirrel away money.
Before committing any money, ask yourself – is the institution regulated by relevant bodies? Is it open and transparent to its customers? Before chasing high-interest yields and any other opportunities, we need to look at a banks integrity and the care it gives its customers. You can never really be too careful.
Happy Saving!
Image credits: Top, by Pixabay via Pexels
Meanwhile, You can click on the following links to read more about financial planning:
- How Much of Your Pay Should You Really Save?
- Financial Coaching: What Is It and How Does It Help
- How to Double Your Money using the “Rule of 72”
- 7 Rules For Never Being Broke
- How to Produce Income From Investing Forever
- 6 Big Risks to Your Financial Success
- The Best Personal Finance Books You Should Read Today
- The 7 Biggest Money Problems Most Kenyans Have
Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
