Top 5 Best Places to Put Your Savings

You have started the journey of savings. Well, you cannot have the money stashed under your mattress and expect it to grow to a certain level. What goals do you have for your saved up money? Well, let’s see what options we have to put that mulla that you have been saving up and places you can watch it grow as you think long-term.

Savings Account

The most common and most available option is the savings account. Most banks and Saccos have a savings account. The interest earned by these accounts might not be as high but remember; there is the power in that compound interest.

These savings accounts have some restriction like when how many times you can withdraw in a year, some will not have access to mobile banking, internet banking or even access to an ATM card.

This can be the perfect place to start your emergency fund. This is because you can easily be able to access your funds.

High-Yield Bank Account

Some banks do operate some accounts that earn a relatively higher returns compared to their normal savings account. Recently, KCB Bank, Kenya announced that they have a goal account that gives you 8.5% interest. This is higher compared to the current rate of 7.35%. You can talk to your bank and see if they have this kind of account.

The catch with his kind of accounts however that is you either make a large initial deposit or that you will not be able to access your funds up to a particular time of your choosing.

These accounts can be perfect for planning your wedding or honeymoon, that perfect holiday to your dream destination, down deposit for your mortgage, down payment for your car, remodeling of your house just to mention a few.

Certificate of Deposits (Time Deposits-Fixed and Call Deposit Accounts)

These are mostly offered by commercial banks and in some countries by both banks and credit unions.  These kinds of products usually give a higher percentage of interest compared to any other savings account and specifically if you put in a large amount of money or/and keep that money in there for long.

The most common saving term is usually between 6 months to 5 years based on your country. The advantage with this kind of plan is that once your deposit has matured and interest earned you can still renew the contract again.

The advantage of this kind of product is that it is insured and regulated by the insurance deposit authority of a country. In Kenya for instance, this is ensured by Kenya Deposit Insurance Corporation (KDIC).

Money Market Funds

This is a kind of a fund that is managed by professionals by pooling resources from different people and purchase securities on behalf of the investor. This kind of product only invests on low-risk kind of securities such as treasury bills or commercial papers.  

The money market fund usually provides a return in the form of interest just like any other product that has a short-term interest rate plan. These kinds of plans are not insured but are controlled by the securities exchange of your country. In Kenya, the Capital Market Authority regulates this kind of product as outlined in the Unit Trust Act Cap. 521 (You can access it here)

These products are commonly offered by insurance companies, mutual funds, brokerage companies and banks. Though the interest earnings for these products are not guaranteed, with some bit of good research you can be able to find a history of a fund that has been performing well.

Treasury Bills and Note and Bonds (Treasury and Corporate)

These are securities that are traded by the governments of our countries.  In Kenya, these products are offered through the Central Bank of Kenya. As a result of the backing they receive from the governments, they are one of the safest investments you can have.

The bills are purchased at a discount and when it matures, you will receive the full face value. The difference between the buying price and the face value is the interest earned.

T-bills are issued for a maximum of 364 days and you can either get them for 91 days, 182 days or 364 days. To get to know which T-bills are on offer in Kenya, please click here. The minimum investable face value in Kenya is KES. 100,000

The T-bonds and note are other options that are also offered by the government. They can be invested as from 1 years all the way to 30 years based on the terms of your choice. In Kenya, the minimum investible amount is KES. 50,000 apart from the infrastructure bonds that the minimum investable amount of KES. 100,000. To get the offer of T-bonds on offer in Kenya, please click here

Corporate bonds are also another avenue in which you can be able to put away your saved up money and earn some interest.  Due to the fact that they are offered by companies, they tend to be riskier compared to the T-bond since the company is at-risk of going bankrupt 

As an overview of the places that you can put some saved up money, these channels will give you a modest rate of return but it is up to you to determine which way works best for you best on how much you have accumulated and at what level of savings you are at.