The investment option which you go with will depend on a number of things, including how much you have, when you need your money, and sometimes, how much risk you are willing to take.
Let’s talk about Savings and Investments, and how to make investment decisions. Before you can decide where and how to invest your money, you must first ask yourself a few questions:
- What do I need to achieve?
- How much do I need?
- When do I need to achieve this?
- How much do I need to save from time to time to achieve what I set out to do?
Let us look at these questions one by one:
1. What do I need to achieve?
This could be anything, from payment of children’s school fees, to payment of house rent, to buying a new car or even a down payment for a mortgage loan.
2. How much do I need?
Calculate how much you need to achieve the projects you listed in your answer to question one.
3. When do I need to achieve this?
When you know the time period in which you need the money, this will help you decide what kind of investment you want to make, whether it is a short term investment or a long term one.
4. How much do I need to save from time to time to achieve what I set out to do?
To answer this question, you have to think about your answers to the last two questions – that is ‘How much do I need?’ and ‘When do I need this money?’ I will explain with an example. Let’s say that you need N360, 000 (Three Hundred and Sixty Thousand Naira only) to pay for your house rent which is due in a year’s time. This means that you need to put away N30, 000 (Thirty Thousand Naira only) every month to be able to pay your rent without difficulty in the New Year. You can decide to put your monthly N30, 000 (Thirty Thousand Naira only) in a savings account which gives you interest. You will then see that you will not need to put aside up to N30, 000 (Thirty Thousand Naira only) every month because your interest will take care of that part of your savings contribution. If you already have some other lump sum of money in savings, you can also put that money in a fixed deposit account that will also earn you interest and help you contribute to your rent savings.
Having savings and investments will help you make money from the money that you already have. It is appropriate to speak to a financial advisor to see what type of investment works best for you.
One last thing, to be able to save and invest, you must be disciplined financially. Remember; always put aside a portion of what you earn or make as savings. Once you have done that, you can then go ahead and spend from the balance.
This has been courtesy of Access Bank Plc. as part of The Bankers Committee Financial Literacy Public Enlightenment Programme brought to you by The Bankers Committee, comprising all the commercial Banks in Nigeria and the Central Bank of Nigeria, CBN.
