To be successful at saving money online, you need to first accept, understand and work around the major truth people tend to forget. We borrow money a lot! Mostly from our own pockets when we spend above our means. Especially when we purchase items that are not entirely necessary, when considering our income bracket. And then we sit back and wonder how our money disappeared and wish we had kept back just a little bit.
“How do you save your money? and “Where do you invest your money?” are the questions that originally spurred the idea behind the previous post, What You Need to Know About Saving Money and Investing to Live Rich. Then, I had begun to understand why there were people who couldn’t save money to save their lives.
In hindsight, the post seems quite insufficient without actual methods of saving and investing. Though we need particular skills to survive through the money journey, because with the skills, the right attitude and comfort while saving your money will emerge. But without being guided on good investment opportunities, the right saving mindset could meet the wrong answer in frustration.
The Simple Guide to 3 Saving/ Investment Options
There are 2 investments and 1 savings plan that have been consistent in my life for the past 3 years. I personally believe these plans are more average-earner friendly and environment friendly. Not to mention practical and easy to indulge into without pulling out a calculator to punch in figures or a dictionary to interpret some terms of the investment concept.
All options enlisted are LOW risk investments, and may only be undertaken by patient people. The ones who wouldn’t mind earnings of chicken fees in months. The ones who have money to spare willingly, and are not necessarily searching for quick-cash earning schemes.
1. Treasury Bills Investment Option
Treasury bills are one of the least worrisome forms of investment that wouldn’t require too long a time to expect returns. As explained in this article, Why You Should Consider Investing in Treasury Bills, since it’s a “debt instrument” used by the government, it’s a zero-risk kind of investment. The passive investment kind where you, say for instance, simply sign a cheque to your bank account officer after communicating your expectations. Then you catwalk away to minding your business, while your money works for you, the 21st century way.
T-bills are sold at auctions which are conducted biweekly by the CBN and can be bought through any authorised dealers (you know, banks. Hence completely risk free and you are sure to get your money back). They are issued for a specific duration (“tenor”) of 91days, 182days or 364 days, which after the expiration of each tenor is when your investment is said to have matured.
For each tenor, the interest rate (aka bid rate/ stop rate) differs. It fluctuates based on demand and amount offered by the apex bank. So you may not have the exact interest at same tenor of similar investments at different periods in time.
The Concept in Treasury Bills Investment
In calculation of the interest to be paid on the investment, How to Invest in Treasury Bills breaks it down clearly:
Say, T-bills worth of N100,000 at 10% bid/interest rate. 10 % interest rate per annum of N100,000 is N10,000. But the N10,000 is per annum i.e. for one year.
To get the interest for a tenor of 91 days, the N10,000 is divided into 365 days, resulting to N27.40 for each day. This is then multiplied by 91 days to get the interest for 91 days i.e. N2,493.
“The interest of a treasury bill is paid to you upfront and credited to your bank account. Say, the N100,000 TBill with an interest rate of 10% you purchased, the CBN debits your account with N90,000. As such your N10,000 interest is paid upfront. Upon maturity, you are paid the face value N100,000. The upfront payment of your interest makes your true yield actually higher.
True Yield is your actual Return on Investment. (ROI). Now, the initial yield for the N100,000 is 10%. However, because they pay you interest upfront, your true yield is actually the N10,000 in interest divided by the N90,000 actually deducted from your account. That is N10,000/N90,000 or 11.11%. This is, thus, higher than the 10% coupon. The True Yield is completely earned when you hold to maturity.” That is, when your investment gets to the tenure you opted for.
There are other critical aspects to treasury bill investment like secondary market, premature liquidation causing penalties, roll over/ re-investment. But truly, they’re not so important to be aware of as your bankers handle the transaction anyways. What matters is to understand the debits or credits when they happen in your account.
The Reality of this Investment Option
With my bank, I only attempt N250,000 when I have up to that in savings. This fetches about N7,000 – N8,500 in interest at the end of 3months tenor. The range of interest dependent on the bid rate at the time.
2. Money market and mutual fund account Investment Option
There are a lot of disagreements that surround money market as a source of tangible income. What people fail to understand, which is extremely important, is that, whatever is termed Low Risk requires patience to yield. A mutual fund account wouldn’t fetch you interest beyond 11-13% per annum. This is to say you should only expect about 1% growth addition to your principal after the 1st 31 days, and more. This wouldn’t seem like much if you were to invest a sum of N10,000.
Hence, pumping in principal above N100,000 would ease up the mind a little with the knowledge of earnings about N1,000 monthly. It is still preferable to the Savings Account, which doesn’t fetch above 4% interest rate annually.
The Reality of this Investment Option
With my mutual fund account where I have a principal of N100,000, I regularly earn between N1,000 – N1300 each month as the interest fluctuates between 12% and 13%. It’s presently at 12.13% p.a.
3. PiggyBank.ng Savings Option
I see this as a true means to hide away your account balance without having to activate the Sherlock Holmes in you. Even though PiggyBank gives the barest minimum in terms of interest, the advantages it possesses would shade that truth. And more recently, it’s even growing to include more options to earning more tiny interest.
How it works is not stiffly by duration/ tenor. You will see your earning progress per day, or earnings in potential days. That is, how much you could incur in years time if you were to maintain the principal invested.
At best, PiggyBank.ng gives interest up to 4% per annum. This sucks if you had sought out a money fetching investment ofcourse. But again, it beats your bank savings account. I like to believe PiggyBank.ng is not really strongly about adding to your income, even though that happens miserly too. But they function primarily to hold back money you’d otherwise spend.
The Concept in PiggyBank.ng Investment
There is a concept to saving with PiggyBank.ng that may lead you to think you have full autonomy on decisions around your savings when you really don’t. You only have full access to your money, which is a very brilliant thing.
To explain, there are only 4 official withdrawal days in a year. These days you can alter to whenever you want it to be, or just stick with the default. Now if you wish to miserably spend your money, by deciding to withdraw it from PiggyBank.ng account on days that are not the registered official withdrawal days, you’ll be penalized by a charged % against your interest. Which defeats the idea of “saving”. And then you’ve lost some money in the process. Who wants that? So then you decide to leave your savings untouched tentatively.
Ofcourse you’re permitted to quit any day. It’s a free-will non constricted form of savings where you have the ability to manage and monitor the day-to-day activities that surround it. You simply pull out your account in the Settings and it’s bye bye to PiggyBanking.
Features in PiggyBank.ng Investment App
Other selective aspects in the App could be “pause”, where you quit temporarily to resume at a later date. There is “auto save” which is typically the essence of the savings structure. Here you register the amount you wish to be deducted (saved) from your bank account and set a frequency for the deductions (weekly, monthly, quarterly, etc).
At the stipulated time, it would be automatically deducted from your account. Meanwhile you could choose to deactivate auto save at anytime. There’s also the “quick-save” which is when you choose to save the registered amount instantly, irregardless of whether the autosave is active or not.
Currently, PiggyBankNG is starting to encourage and reward savers in achieving target savings goals and being consistent in the form of points. These points could be converted into peanut cash, cash nonetheless. More points rewards, more cash benefits. Technically, increasing the overall interest incurred annually.
PS: I stressed the meagre nature of the interest earnings to put emphasis on PiggyBank.ng as a savings structure, and not an investment opportunity where you look out for interest. A “safe-lock” feature though fetches around 12% on a fixed sum. If one were to search for an investment with PiggyBank.ng.
When you grow the mindset that these are merely means to locking money away for when you may need it, then you’ll be assured that you are making wise decisions for your money. And there may never come a time where you would sing songs of bankruptcy.