advantages and disadvantages of savings account

Savings Account advantages and disadvantages in Kenya

Savings account advantages and disadvantages, Saving accounts are one of the best accounts for investing extra cash. With a saving account you can access soft loans from banks in Kenya. To open an account, all you need is to walk to a banking institution and provide your ID and personal details. At RG Sacco Ltd, we offer loans to members who have at least three months “active saving accounts” from our sacco. To open a savingĀ  account, visit this page to fill an online form. You will gen an instant SMS once your account is created. Here are some advantages and disadvantages of savings accounts.

Advantages and Disadvantages of Savings Account

Savings Account Advantages

  1. Savings account are easy to set up- all you need is your ID  and personal details
  2. Withdrawal amounts: Withdrawing your money from a saving account is very easy. However due to money laundering regulations in Kenya, you will have to fill a certain form if you intent to withdraw more than one million shillings from your Savings account.
  3. Safety and Security: Savings accounts are typically insured by government agencies up to a certain limit, which means your money is protected from bank failure or other financial risks. In Kenya Saving accounts are insured by Kenya Deposit Insurance Corporation. KDIC Provides a deposit insurance scheme for customers of member institutions, which means your money is protected by the government and cannot be lost.
  4. Liquidity: Savings accounts offer relatively high liquidity, allowing you to withdraw your funds easily and quickly. This makes them suitable for emergency funds or short-term savings goals.
  5. Interest Earnings: While the interest rates on savings accounts are generally lower compared to other investment options, your money will still earn some interest over time, helping it to grow.
  6. Low Risk: Savings accounts are considered low-risk investments since they are backed by banks and government insurance. Your principal amount is not at significant risk of loss.
  7. Easy Accessibility: Most savings accounts come with options for online banking, ATMs, and mobile apps, making it convenient to access your funds and manage your account.
  8. No Fixed Term: Unlike some other investments, savings accounts do not have a fixed maturity date, allowing you to keep your money in the account for as long as you want.

Disadvantages of Savings Account

  1. Transaction limits– In Kenya there are certain transaction limits that have been set by Central bank and local banks. Please check with your banking institution.
  2. Although loan interest has drastically reduced in Kenya today due to government regulation, it will be harder for small businesses to access credit since banks will be more strict to reduce the risks.
  3. Low Interest Rates: One of the main drawbacks of savings accounts is the relatively low interest rates they offer. This means your money may not grow as quickly as it would with other investment options.
  4. Inflation Risk: If the interest earned on your savings account does not keep pace with inflation, the real value of your money can decrease over time.
  5. Opportunity Cost: While your money is safe in a savings account, it may not generate as much potential return as it would in higher-risk investments like stocks or mutual funds.
  6. Fees and Minimum Balances: Some savings accounts have fees or require you to maintain a minimum balance. Be sure to read the terms and conditions to understand any potential costs associated with the account.
  7. Limited Transactions: Many savings accounts have limits on the number of transactions you can make each month, which could be a drawback if you need frequent access to your funds.
  8. Not Ideal for Long-Term Growth: While savings accounts are great for short-term goals and emergency funds, they might not be the best option if you’re looking for significant long-term wealth accumulation.
  9. Interest Taxation: Interest earned on savings accounts is typically considered taxable income, which can impact your overall tax liability.

In summary, savings accounts are a safe and accessible option for keeping your money while earning some interest. However, their relatively low interest rates and potential impact of inflation mean that they might not be the most effective way to grow your wealth over the long term. Depending on your financial goals, it’s important to consider other investment options that offer potentially higher returns and better inflation protection. Savings account advantages and disadvantages.

Looking for a business loan, Emergency loan and personal loan in Kenya, well look no further. At RG Sacco Ltd we offer cheap loans at a return interest rate of 1 percent. Just save with us for three months and we will give you a loan of three times your savings Visit our loan products page to learn more

At RG Sacco Ltd, we require you to save regularly and consistently for a period of three months. The Loan Committee will evaluate your saving pattern and predict how much loan installment you can comfortably afford to pay. Its always good to have a constant amount. Eg. save 50/- or 100/- daily instead of saving 200 today, then you skip several days and save 500/- or 1,000/-. Let your income have a predictable pattern, whether you will be saving daily, weekly or monthly. Savings account advantages and disadvantages.

We also highly discourage depositing large amounts at once. Some people save little amounts faithfully until the last week of the three month period, then they deposit/top-up with big sums hoping to get bigger loans. This pattern will send a very wrong signal to the Loan Committee. But your savings should gradually increase with time – an indication that your business is growing, as opposed to decreasing savings.

We have savings account which is meant for loans, and we also have current account which is transactional and cannot access loans. Money in current account can be withdrawn any time, as opposed to savings.