If you're like most people, you're always on the lookout for the best place to save your hard-earned money. The savings product you choose needs to align with your needs and have the features you value the most.
There are many considerations to keep in mind when choosing the right saving product. They range from account fees and minimum deposits to account accessibility and limitations. But the most important one is interest rates. High interest rates can help protect you from inflation and grow your savings.
In Kenya, two of the savings products that pay competitive interest rates are fixed deposit accounts and Sacco savings accounts.
This article will compare the Umba digital bank fixed deposit account to traditional Sacco savings accounts to discuss the differences between the two.
A fixed deposit is a savings account in which you deposit your money for a certain/fixed/pre-determined period of time. At the end of the tenure, you receive the amount you have saved plus the accrued interest.
For example, Umba Bank offers fixed deposit accounts with tentures of 30days, 90 days, 180 days, 270 days, and 365 days. You can save a fixed sum (a minimum of Ksh5,000) in an Umba fixed deposit account for a specific period of time, for instance, when you locked your savings for a year, you earn an attractive interest of 16% per annum.
For 30 days, the interest is 12% per annum, 13% p.a for 90 days, 14% p.a for 180 days, and 15% for 270 days.
A Sacco savings account is a type of savings account offered by deposit-taking Saccos. These accounts typically offer a variety of deposit accounts, which are often grouped into two categories:
To access your money from a non-withdrawable savings account in a Sacco, you are typically required to close your SACCO account, and give a notice of up to 60 days, or follow specific withdrawal procedures.
Non-withdrawable savings Accounts are the most common choice among Sacco members, often known for their attractive interest rates. They’re the Sacco savings account we will compare to Umba’s fixed deposit account.
The Umba's Fixed Deposit Account offers an attractive annual interest rate of up to 16% for savings locked in for at least a year. In contrast, Saccos typically pay different rates, ranging from 12% to 15% per annum, depending on the specific Sacco.
Umba's fixed deposit has the advantage of no upfront account opening or registration fees, making it a cost-effective option to start saving. Opening a Sacco account often requires paying registration fees.
When opening a savings account, it's important to compare other fees, such as ledger fees, cost of auxiliary services such as statement requests, which some Sacco accounts might charge. The Umba Fixed Deposit Account does not charge any operational or maintenance charges.
Another difference is the interest payout frequency. Umba pays interest on maturity or at the point of exit. This can offer you more flexibility if you prefer frequent interest payouts. Saccos pays interest annually, usually 1-3 months after the lapse of the financial year.
The Umba Fixed Deposit Account and Saccos Savings Accounts offer varying degrees of flexibility and penalties.
Umba offers multiple lock-in durations, allowing you to choose from 30, 90, 180, 270, and 360 days. This flexibility lets you tailor your savings to your specific financial goals.
Sacco savings are typically locked in until a member leaves the Sacco by closing their account. However, they can borrow against their savings.
Umba provides a dedicated mobile app that allows customers to track and manage their savings easily. The app also enables users to create and customize their savings accounts by naming them. This can make it convenient for setting specific goals and creating sinking funds.
Umba users can also view the interest earned on their savings directly through the Umba mobile app. This feature helps users stay informed about their savings growth.
The digital capabilities of Saccos saving accounts depend on the specific Sacco. Some Saccos may offer mobile apps and digital platforms, while others may not. Saccos with digital platforms typically allow customers to check account balances, view mini-statements, track savings, and access information about guarantors.
When considering Umba Fixed Deposits and Sacco Savings Accounts, it's important to note the distinctions in their account opening requirements.
For the Umba Fixed Deposit Account, a minimum of Ksh5,000 is needed, and the process is digital, involving submitting essential KYC documents through the Umba app, in a process that takes less than five minutes.
Opening a sacco savings account might involve different and more stringent procedures, including:
Please note that specific requirements may vary among different Saccos.
Here are scenarios of when to consider Umba’s fixed deposit account
Here are scenarios of when to consider a Sacco savings account:
Here are scenarios of when to consider both the Umba Fixed Deposit and Sacco savings account:
Regularly saving money comes with numerous advantages. Your savings can offer financial security during emergencies like job loss and help you accomplish your financial goals, including a major purchase like a home or starting a business.
The key to successful saving is picking the right account.
The Umba Fixed Deposit Account helps you keep your money locked up for a specific term starting from 30 days and removes the liquidity issues associated with high-interest paying accounts.
On the other hand, Saccos can help you access credit, including higher amounts than you have saved, when you have other members guaranteeing your loan. Both the Umba Fixed Deposit Account and the Sacco deposits can help improve your savings habit and ensure you always put away a percentage of your income for future use.