Updated: December 9, 2020
It might sound surprising in this day and age, but I have met people who don’t have a bank account. Or doesn’t like having their money inside a bank savings account.
The reasons for being unbanked vary. Below are the most common I’ve encountered.
Types of people who don’t have a bank account.
1. There’s no bank near them.
This is especially true in rural areas and provinces in the Philippines, where the nearest bank is at least an hour away. It’s inconvenient and impractical for them to open one.
2. They can’t afford it.
Some people can’t afford to open a savings account. They either have no source of income, or they’re only earning a subsistence wage.
3. They generally distrust banks.
They usually have bad stories they’ve heard about banks. A few have personally experienced losing their money, due to bank closure or identity theft.
4. They lack financial literacy.
They think banks are unnecessary. Most believe that their money is more secure if it’s with them and safely hidden inside their home.
6 reasons why it’s good to have a bank savings account.
The first two categories above point to a social issue that financial institutions and the government should address. However, those who belong to the last two types are people that I hope would reconsider after reading this article.
1. It will earn interest.
Yes, the interest earned is small and would never be able to beat inflation. But it’s better than not earning any interest at all if your money is just tucked away under your mattress or inside your piggy bank at home.
Moreover, there are now special deposit accounts that give higher-than-usual interest rates if you meet certain terms.
2. It’s more secure than keeping money at home.
Your money in the bank is insured by the Philippine Deposit Insurance Corporation. The coverage is up to P500,000 per bank. If you want your P2 million secure, then just spread the money evenly in four different banks.
Your money in the bank is more secure than keeping it with you or inside your home, which is exposed to the risk of being stolen, lost, misplaced, or destroyed by fire or natural disaster.
3. It still provides sufficient liquidity.
Nothing beats having money in your hand, that’s why it’s good to have an emergency stash of cash at home. But in exchange for more security, banks in a savings account can still have sufficient liquidity.
ATMs are now widespread, and debit cards allow you to spend without the need to withdraw money from banks. Plus, online banking and FinTech apps have made it convenient to access your savings for paying bills and transferring money.
4. Most investments require a nominated bank account.
Having a bank account is necessary if you want to invest in a Unit Investment Trust Fund. Some mutual funds and other investments also require a bank account where earnings and dividends can be deposited.
There are also investment programs that you can enroll in, which requires a nominated savings account, so it can automate the investing process, and thus saving you time.
5. It’s useful when applying for visas and loans.
Having a bank savings account is useful to show proof of financial capacity, which is often used when applying for a visa or having your loan application approved.
During my interview for a US visa, the officer asked for my bank certificates of deposit and after just a couple of questions, decided to approve my application. I didn’t have to show my income tax returns or other financial documents.
6. It makes other financial tools easily available.
Try depositing a large amount in your bank account and you’ll get a pre-approved credit card in a few weeks. With the proper money mindset, a credit card is a good way to have financial leverage.
Furthermore, most banks require that you have a savings account first before you could open a personal checking account. This is, of course, another tool you can use for financial leverage.
Lastly, some bank savings account can also give you free life insurance, and even health or travel insurance in some cases. That’s a cost-free way to have financial protection for you and your family.
Savings accounts are part of a healthy financial portfolio.
Banks and savings deposit account have their own purpose that no other institution or product can provide. More than anything, it’s a secure place to put your money for your near and short-term spending needs.
Banks are not evil, and they’re not out to get your hard-earned money through penalties and fees. They are and should be part of your financial life.
Read more: How to Choose the Right Bank For You
