I recently took part in the Stanbic Money App Challenge where we were required to develop a mobile application to solve the problem of financial illiteracy in Ghana. In order to develop a meaningful app which solves the problem, I decided to do some research on financial illiteracy in Ghana.
From the research others had conducted I discovered that many young people lacked basic financial literacy knowledge and skills in many areas including budgeting, saving, expense management, investments and insurance.
I also discovered that there are several investment options available in Ghana, yet a lot of them are unknown to majority of Ghanaians, so in this post I share with you 6 proven ways to grow your money in Ghana along with the risks involved and potential profits you could derive from each avenue.
1. Opening a Savings Account
A savings account is one of the easiest ways to grow your money in Ghana.
Basically a savings account allows you to store your money securely while earning interest on it. In a sense, you are lending your money to the bank so that they can offer loans to other customers, so the bank pays you a little interest as a way of saying thank you.
You can withdraw your money at anytime from your savings account however there is a limit on the number of free withdrawals you can make each month. Withdrawals beyond your monthly limit attracts charges.
Interest rates on a savings account are usually very small, ranging from between 2% and 10%. Savings accounts come with the least risk. You are almost certain your money will be safe no matter what happens.
You need very little money to open a savings account. Some banks even let you open a savings account without any money!
2. Buying Treasury Bills
A treasury bill is a short time investment product offered by the Bank of Ghana on behalf of the government. You can invest for?either 3 months (91 days), 6 months (182 days) or 1 year (365 days).
Simply put, when you “buy” a treasury bill, you lend money to the government of Ghana. When the maturity period is reached the government repays the amount it borrowed from you plus the given interest rate at the time it borrowed the money (at the time you bought the treasury bill).
The interest rate associated with the money you lend to the government depends on how long you lent the money for. (3 months, 6 months or 1 year). Here are the interest rates as at 10th June 2016.
- 91 – Day (3 Months) -22.7939% per annum
- 182 – Day (6 Months) -24.6678% per annum
- 1 – Year Note – 23.00% per annum
You can check the current rate from the Bank of Ghana website
Here are some reasons why you should consider buying treasury bills:
- Treasury bills are risk free.
- They can easily be converted to cash or even used as collateral for a loan.
- The interest rates are much higher compared to savings accounts.
- You can collect your interest on the day you purchase the treasury bill.
To buy treasury bills, just walk into any bank with your money and complete the form. You can buy treasury bills starting from as low as GHC10.
For more information on treasury bills, you can check out NTHC.
3. Opening a Fixed Deposit Investment Account
Fixed deposits are like treasury bills. But this time you are lending money to the bank and not the government. For fixed deposits, you open an investment account with a bank and deposit money in it at a fixed interest rate for the period of the investment.
Different banks have different tenures(maturity periods) but the most popular ones are 90 days, 180 days and 1 year. Some banks go as far as 2 years. The interest rates on your investment and the minimum amount of money you need to open a fixed deposit account varies from bank to bank.
The interest rate also depends on the amount you are investing and the maturity period.
For instance, for CAL Bank, the interest rate for an investment between GhC 5,000 and GHC 49, 999 for a 3 month period is 14.15% and you need a minimum of Ghc 5000 to open the fixed deposit account whereas for Standard Charted Bank, the interest rate for an investment between GHC 20,000 and GHC 40,000 for a 3 month period is 7.5% and you need a minimum of GHC 1,000 to open the account.
Some banks will allow you to withdraw from your fixed deposit account while some banks will not. Banks will however charge you a penalty if you decide to terminate your investment before the maturity period.
You can check out the websites of each bank to find out the specifics of their fixed deposit accounts.
Here are some reasons why you should consider opening a fixed deposit investment account
- Fixed deposits are very low risk
- They can easily be converted to cash or even used as collateral for a loan
- The interest rates are higher than savings accounts.
- If you are investing a very large amount, you can negotiate the interest rate.
4.Buying Shares/Stock in a company
Shares are investments that you make in a company in return for dividends. When you buy shares in a company it means you own part of the company and you get a percentage of the profits the company makes depending on how much of the company you own.
Shares are a generally high risk investment since there is a chance that things could go very wrong and you could lose all your money. Also the value of your money can depreciate or appreciate depending on circumstances.
In Ghana, if the company you want to invest in is listed on the Ghana Stock Market, then the stocks are regulated by the Ghana Stock Exchange. Before you buy shares in any company, it’s best to solicit the advice of experts known as brokers in order to make the best decisions especially on which companies to invest in.
A mutual fund is a company that pools together a group of people’s money and invests it on their behalf. Mutual funds are also called Collective Investment Schemes. Investing in mutual funds allows individuals to pool resources with other individuals and investors in order to create a greater buying power. The funds gathered are then invested into stocks, bonds and other assets.
The interest rates for mutual funds are generally high, some going as high as 20%. The advantages of investing in mutual funds is that your money is managed by professionals who can make the best financial decisions in order to grow your money. Also mutual funds are affordable. The risk involved however is relatively high.
A bond is an investment in which the investor loans money to either a company or even the government. The company agrees to pay back the loan along with an interest at a certain date known as the maturity date. Normally companies issue bonds to raise money for a project instead of going for a loan from the bank.
The interest rates associated with bonds vary and it is relatively low risk because if the bond issuing company goes bankrupt, all debts and bonds are paid before any equity is paid.
So, I just shared with you 6 ways you can grow your money in Ghana. If you like this post, don’t forget to share or leave a comment below.