August 13, 2020 / 12:40PM/ Gloria Kafui Agbomadzi / Image Header Credit: Gloria Kafui Agbomadzi
To be financially competent means to possess the knowledge necessary to allow an individual make informed and effective decisions with all of their financial resources. In improving your financial competence, utilizing an annual savings plan can help in achieving your life goals. The primary principles of financial literacy include learning how to budget, track spending, effectively pay off debt, and properly plan for retirement.
An annual savings plan involves deciding how much money you would like to have saved at the end of the year, choosing a bank account for that purpose and making weekly or monthly contributions to that account to meet that annual target. For example, if you would like to have N300,000 saved by the end of December, you could decide to save about N5800 every week or N25,000 every month.
This fund could be savings towards a vacation, property purchase, rent, retirement, school fees, investments or other pursuits. An annual savings plan isn't an emergency fund (an emergency fund is a stash of money set aside to cover unexpected and urgent financial requirements), this savings plan allows you build your net worth and have a good base to start an investment portfolio.
It is important to keep a record of the target amount to be met, how often money should be deposited and how much should be deposited at every interval. Equally important is choosing the right kind of account to save it in. The account to be used for your annual savings plan should be one designed specifically to save towards a set goal, like UBA's Target Account, which accrues credit interest on your savings and gives incentives for self-control.
The importance of saving money cannot be understated. With so many proven benefits, saving money is one of the best financial habits you can adopt and with continuous practice it can help you develop financial competence.
About the Author
Gloria writes about useful tips for balanced living. Her writings are based on real life experiences and research. She also writes on diverse topics including finance, education, health and lot more.
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