BANKING TIPS: Benefits of having bank account

Whether you like it or not, at some point in your life, you will need a bank account but before that, you will need to find a bank that fits your unique needs.

A few months ago, I shared four factors you need to consider when choosing a bank; security of your money, fees, customer services, and convenience. Once you have chosen your bank, it’s time to start thinking about which account can serve you better.

There are several different types of bank accounts; checking, savings, and investments but it is critical to choose an accou-nt that is most cost-effective for you.

Having said that, you would think everyone has a bank account but this is not the case; two billion people worldwide do not have a bank account according to the World Bank’s Global Financial Inclusion Database (in Tanzania, only 16 per cent of the population have a bank account) and more than 20 per cent of unbanked adults receive wages in cash.

In Africa, cash is still King as 94 per cent of retail transactions are conducted in cash. It is understandable why most of us prefer cash transactions instead of formal banking transactions but if you are one of those who do, you are missing out many benefits of managing your money through a formal bank account. This week, I will share with you four benefits of having a bank account.

A bank account can help you access credit

Establishing a relationship with a bank, makes it easier for you to access different financial services offered by the banks. In the event that you would like to purchase a car or a house and you don’t have any assets or capital, the bank can help you by extending a personal loan. Without having an existing bank account, no banks will lend to you therefore you miss an opportunity of having extra cash to fulfil your needs.

Safety

The foremost advantage of having a bank account is safety. Instead of carrying all your money with you all the time and risking your life, you can store your money in a bank account. In addition, money that is left at home in a safe or under the mattress is not safe since your home is exposed to the risk of burglary, accidents such as fires, and natural disasters such as floods. But when you deposit your money into your bank account, the bank will store your money in their secured vaults. In addition, your money will be insured so will always be safe even if your bank closes (goes bankrupt) or is robbed. The current maximum amount deposited in the bank which is insured by the Deposit Insurance Board (DIB) is Sh1.5 million.

Convenience

Having a bank account gives you the option to withdraw your money easily through Automated Teller Machines (ATMs) which are located in many areas, removing the need for you to go to your bank. Additionally, many banks now offer debit cards within the MasterCard or Visa network which gives you an opportunity to pay electronically for a variety of products and services around the world.

Easy to manage your finances

Most people that are using cash for their retail transactions get to the end of a month without knowing how they spent their money. By having a bank account, you will be able to track your spending through a bank statement.

The transactions on your bank account gives you an idea of where your money is going, therefore providing a roadmap on where you can curb your spending in order to manage your finances more efficiently.

In summary, hoarding money at home, whether in a safe or mattress is not the best way to hold on to your money.

The safest way to keep your money safe is in a bank account. Furthermore, according to World Economic Forum report, people with bank accounts are better able to start a business, and women who receives their wages into a bank account, spend more money on their children’s health and education hence increases their children’s chances of changing their financial picture.

Mr Mkwawa is a seasoned banker