- Your liquidity does not show your financial stability
- Keeping money in the bank will not create you wealth
- If you are in a class where a bank account is for prestige among your peers, you are doing yourself a disservice
Nobody gets rich by depositing their money with a financial institution unless you are dealing in the billions.
A financially secure future is not obvious to anyone who wants to enjoy a life free of financial worries and that is why this article is here.
You’re doing yourself a disservice if you’re in a class where having a bank account is a way to gain respect from your peers. You should only use a bank account for transactions that you cannot perform without cash. Despite all the advancements in technology, cash remains king.
Read: Sharpen your investment instincts
Having a lot of cash on hand does not necessarily imply that you are financially stable. Poof! There’s money today and then tomorrow it’s no longer there.
Keeping money in a bank will not help you get wealthy, since what your money should do for you should be far more important than what it does for the bank.
Why you should not keep your money in the bank
Is there anything better than having your money grow while you sleep? If you answered yes to this question, then read on. Join me and let us work towards becoming wealthy together.
If you’ve ever wondered why banks express interest rates as “per annum” (per year), here you get to know.
Let’s get one thing straight: the bank doesn’t exist to help you accumulate wealth; it exists to drain your account of all available funds. You can’t even use their pens without their tying a thread to them, because they don’t trust you enough yet they keep your money. Isn’t this bank’s tendency amusing?
The bank, on the other hand, will offer you a deal that is more favourable to them than to you, but in the fine print, it appears to be favourable to you as well. It’s in your favour most of the time, but it’s against your growth.
Since banks need to make money to stay afloat, this is not a crime.
For example, consider this situation. If the bank holds Ksh1,000 for you for a year, you’ll get, if they are not too focused on bankrupting you, Ksh200 in return. This is because of the annulated interest returns and the charges they impose on you.
With a rate of 14% per annum, you’ll make Ksh140 a year from your Ksh1,000 investment.
It’s important to note that the bank’s percentage is based on a year average, not a monthly average. If one assumes that their money would receive a monthly interest rate of 14 per cent, they will be surprised when they check their accounts at the end of the year.
Read: Are medical bills driving people into poverty in Kenya?
Bearing in mind the costs of banking, getting the Ksh140 may also be hard to come by.
Your money should work for you
Let’s take a look at a situation in which you invest your money and reap the benefits.
Starting a small business with a profit of less than Ksh50 per day is possible if you’re in a place and time when you can afford to do so. If you work every day for a year, how much money can you make with Sh1,000?
This is what happens if you’re successful in running your business.
If you can keep making the Ksh50 a day, then you’ve created a profitable business enterprise.
Assuming that you worked for 350 days and took 15 days off for vacations and other commitments, your Ksh1,000 would have earned you Ksh17,500 if the running costs were nil.
When it comes to a financial institution, you won’t get anything close to this kind of return even if you pay the bank’s charges.
Rich people never store their money in a bank; instead, they put it to work for them, generating additional income. When earnings soar, they reinvest the extra money, and the cycle continues, ending in a windfall for all.
Can you put your faith in yourself enough to start your own business with the money you have?
Read: Fintechs solving Africa’s generational challenges make continent innovation hub
