The ability to manage one’s finances is key to the realisation of numerous goals and objectives, from buying a home to planning for retirement.
Yet, while it’s possible for individuals to plan, earn, save, borrow and spend money on their own, dealing with large sums of cash alone can be cumbersome and challenging.
That’s where banks and banking products and services come in.
Granted, 1.4 billion of the global population still don’t have access to bank accounts, with the problem especially acute in regions like Sub-Saharan Africa. Nevertheless, better regulations and technological advancements are improving things in countries like Ghana, and Nigeria and Turkey, and providing the public with more and more ways to ensure good financial health.
With that in mind, here are some of the main banking products and services you should know about:
- Savings Accounts
Banks, primarily, serve as a place to store one’s cash, and savings accounts are the main way these financial institutions help individuals save money for future spending.
In a nutshell, savings accounts function like piggy banks, which keep your money secure until you need it. However, banks typically also pay customers interest (i.e., a small sum of cash) on the money in their accounts. This makes opening and using a savings account more beneficial in the long run.
Note that there are several types of savings accounts, each with slightly different characteristics.
- Current Accounts
Like savings accounts, current or checking accounts also provide customers with a place to deposit cash. Unlike savings accounts, though, current accounts are largely focused on helping customers manage everyday spending.
Bear in mind that while account holders can easily access the cash in their accounts via cheques, ATMs or electronic transfers, current accounts don’t often yield interest. Additionally, you could be charged fees on certain transactions.
That said, current accounts offer a lot of flexibility and can make paying for things like rent, utilities and groceries so much more painless.
- Fixed Deposits
Fixed or term deposits present yet another way to save money for the future. In contrast to savings and current accounts, here, customers are required to deposit a lump sum of cash and not touch it for a fixed period of time. In return for this, banks typically reward depositors with higher interest rates than they’d earn from traditional savings accounts.
Essentially, fixed deposits serve as good, safe ways to grow your wealth. It’s important to remember, though, that interests are generally not paid if you withdraw your cash before a term ends. Plus, you could incur a significant penalty for doing so.
- Loans
Banks also serve as sources of loans for emergencies, the purchase of big-ticket items like cars and homes and even starting a business.
In a nutshell, loans involve a sum of money being lent by the bank to a borrower. This results in the borrower incurring a debt and being required to return the principal sum with predetermined interest within a set timeframe.
There are various types of loans, which can be secured (requiring collateral that can be seized in the event of non-repayment) or unsecured (without collateral). Additionally and importantly, not everyone will automatically qualify for a loan as banks often scrutinise the creditworthiness of borrowers beforehand.
- Mobile Banking and Mobile Money
Mobile banking is a service wherein customers get to transfer money, make balance enquiries and access various other traditional banking services via the use of a banking app. Mobile money, meanwhile, is a digital wallet that allows people to send or receive money, store cash and make payments with the aid of a mobile phone.
The two services share several similarities, and some financial institutions have sought to merge the two. However, what’s necessary to note is that mobile money can be utilised even by people without bank accounts. And this has proven beneficial to unbanked individuals, especially in regions with high internet penetration like sub-Saharan Africa.
Choosing the Right Bank
Banks come in many shapes and sizes, and the right bank for you is always the one that best fits your needs. This is why before opening a bank account or signing up for a banking service, you should take the time to evaluate your financial situation and requirements.
Here are three main things to consider:
- Type of Bank — Decide whether you want to opt for a traditional retail bank (a physical institution with a network of branches), an online bank (a bank that conducts all financial transactions via the internet), a credit union (a not-for-profit institution managed by members) or a neobank (a bank-like digital platform usually operated by financial technology firms, sometimes in partnership with traditional banks). Each option has its pros and cons, but note that neobanks strive to simplify services and improve accessibility, which can be beneficial to unbanked individuals.
- Banking Fees and Interest Rates — Every bank charges fees for transactions, ATM withdrawals, general maintenance and facilities like overdrafts. Some of these can be waived or avoided, though. So, shop around. Also, consider how much interest is being paid on cash in savings accounts, fixed deposits, and other interest-bearing accounts.
- Additional Banking Features— Many banks these days offer mobile banking services. But check, too, for other offerings, such as improved security features, easy contact options and mobile money services. Make sure to also find out how much money you need to maintain in your accounts at all times.
The above aside, it’s recommended to also research and read up on existing regulations as well as the banking services and products available in your region. For instance, those in Africa could peruse material and articles on the websites of central banks like the Bank of Ghana and Central Bank of Nigeria as well as banking associations like the Chartered Institute of Bankers of Nigeria. For those in Turkey, could use Central Bank of the Republic of Türkiye .
Additionally, you could seek to enhance your financial knowledge via financial literacy programmes like FinGreen by QNET.
With a focus on empowering those who’ve been traditionally excluded from financial services develop healthy financial habits and take control of their lives, FinGreen can be perfect for cluing you in on how to manage your money and make informed financial decisions for the future. Not just that, it could also help transform you into a financial literacy champion who’s able to share your knowledge with others.
Yes, choosing the right bank as well as banking services and products can be challenging. But with the right guidance, you’ll be able to pick the financial services that are right for you.
