Cash in hand today isn’t the same as tomorrow. What GHS 10.00 can purchase today will not be able to purchase the same item or service tomorrow, though the face value of the money might remain the same. In order for the value of our monies to keep up with the regular changes in our economy and for it to gain value over time, one has to invest in instruments which will grow their monies with time. Fortunately, such instruments one could invest in for future gains exist. In this issue, we introduce you to just a few. Watch out for the December issue of ENJOY for the continuation.
Savings accounts are risk-free. Interests paid on these accounts vary. Higher amounts attract higher interest and vice versa, all things being equal. These accounts are very flexible as account holders can have access to the funds as and when they wish. Interest rates range between 2 & 15% per annum depending on the amount and the institutions involved. In Ghana currently, one can start with as low as GHS 10.00 or even less.
Fixed Deposit Accounts
Fixed Deposits like Savings Accounts are also risk-free. Returns on such investments are certain and interest rates are fixed at the time of investment. This enables one to know in advance what to expect in monetary terms when his/her investment matures. Fixed Deposits have fixed maturity periods. Investors can choose from 30, 60, 91, 182, 275 and 365-day maturity periods. Interests are also higher than that of Savings Accounts. Interests range between 20 and 30% per annum with some microfinance institutions offering a little bit more. Depending on the amount involved, one could negotiate for higher amounts.
In case of any emergency, one could easily discount one’s investment before maturity at a fee. Other institutions have also designed it in a way that makes it possible for investors to top up on a monthly basis.
Treasury Bills, like the previously stated investment types, are risk-free. They are issued by the government and have fixed interest rates like the Fixed Deposit. Their maturity periods are also fixed like the Fixed Deposit and can be bought either at cost value or face value. One can start with a minimum investment amount of GHS 500.00.
Interest rates on the market according to Bank of Ghana’s website as at 17th October include:
91 days – 22.81%
182 days – 24.45%
365 days –23.50%
The Financial Term of the Month: Nest Egg
Nest egg refers to a substantial sum of money that has been saved or invested for a specific purpose. A nest egg is generally earmarked for longer-term objectives, the most common being retirement, buying a home and education. It can also refer to money kept aside as a reserve to deal with unexpected emergencies such as a medical problem or urgent housing repairs. “Nest egg” has been used to refer to savings since the late 17th century. The term is believed to have been derived from poultry farmers’ tactic of placing eggs – both real and fake – in hens’ nests to induce them to lay more eggs, which meant more income for these farmers. Nest egg proceeds are not to be invested, in hopes of achieving a high rate of return, in such volatile investments as commodities, small-cap stocks and currencies, since their inherent volatility makes them less suited for conservative investing.