Keep 2015 financial resolutions alive

Sanderson Abel
Compliments of the new season to all, hopefully you have already drawn up your short list of your 2015 resolutions.
It is easy to write down your resolutions but quite difficult to put words into action. In most cases the success or failures to realise our resolution depends on what we do as individuals or families.

One of the most common resolutions that people make is the need to set aside a certain amount of money to purchase some assets during the course of the year.

The ability to amass these resources will depend on your discipline and personal financial behaviour during the course of the year.

A person is usually faced with two options once they get an income i.e. either to consume the whole amount or save part of it.

Once they decide to put aside a part of it, they will have made a decision to save. Savings is that part of income not spent on current expenditures.

Developing personal savings culture is the right step in this direction, no matter how small the amount. Over time, this amount will become substantial.

Once a decision to save has been made, approach any bank for advice on what savings products they have on offer that you think meets your requirements.

Your bank will explain to you what the various accounts mean and will indicate to you an appropriate account for your purpose.

Some of the accounts which you need to consider are offered by almost all banks. They include the following.

Fixed deposit account

A fixed deposit is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account with a given maturity date.

The defining criteria for a fixed deposit is that the money cannot be withdrawn for a fixed period of time.

This contrasts with a demand deposit account which does not have a maturity date. Some banks may offer additional services to fixed deposits holders such as loans against fixed deposit certificates at competitive interest rates.

Money Market Deposit

According to investorwords.com money market deposit account is a non-financial account that pays interest based on current interest rates in the money market.

These accounts offer many of the same services as transactions accounts although the number of transactions is limited.

These accounts are managed by banks and can be a convenient place to store money that is to be used for upcoming investments or has been received from the sale of recent investments.

Money market accounts typically have a relatively high rate of interest and require a higher minimum balance to earn interest. These accounts are not  subject to monthly fees and charges.

Transactional Account

In banking terminology, the term transaction account refers to a basic bank account with a financial institution which allows for the efficient transfer of funds by the account holder to third parties as well as receiving electronic payments into this account.

This is an account that the customer will use to receive or make payments, withdraw funds and generally run their personal day to day financial activities.

A customer can deposit or withdraw any amount of money any number of times, subject to availability of funds.

Such accounts attract service charges and other transactions costs that end up eroding  the customers balance over  time.

These accounts are not appropriate for making long term savings. With transactional accounts, you can be able to access loans or overdrafts from your bank.

Once you are clear on each of the savings or investment products, you may wish to visit other banks to ascertain how their products compare in terms of interest rates and bank charges before you finally settle with any bank of your choice.

Sanderson Abel is an Economist. He writes in his capacity as Senior Economist for the Bankers Association of Zimbabwe. For your valuable feedback and comments related to this article, he can be contacted on [email protected] or on numbers 04-744686 and 0772463008