THE post-pandemic economic climate has seen an increase in household savings in Jamaica, which is good news.

But interest rates on regular saving accounts are negligible. Instead you should consider putting your money in high-yielding savings accounts.

Just recently I had a meeting with a client to review his investment portfolios. This client’s emergency funds were contained in a regular savings account earning less than one per cent per year. He was surprised to know that he could earn above six per cent per annum at compound interest on a bond portfolio account at BPM Financial Limited. I also showed him the flexibility of such accounts in accessing funds while still maintaining a high interest savings rate.

Clients should seek to review their savings and investment portfolios with their financial advisors at least once per year. It helps to keep customers on track with their financial goals and make any necessary adjustments to their saving and investment strategy.

As people get older the importance of long-term investments becomes more appealing and urgent, as retirement draws nearer. Since emergencies can happen at any time, it is necessary to have a well-resourced emergency fund on standby. The best account to hold emergency funds is a high interest rate savings or investment account. This type of account helps customers to grow their money at a much faster rate than the traditional savings account to meet short-term goals. The long-term equity/stock accounts are important to beat inflation in the future, especially when interest rates fall and prices are rising. A combination of a high-yielding emergency fund and a long-term equity portfolio provides the diversification that is needed for financial security.

What’s the purpose of a regular savings account? It’s necessary to save funds for your everyday use or needs and also to meet any rainy-day expenses. A regular savings account gives a small interest on your savings that’s barely noticeable. These accounts are available at banks and credit unions. With a regular savings account funds are easily accessible. This can be an advantage or disadvantage, depending on your behaviour towards money and your financial self-efficacy. How we manage money is not dependent on our intelligence but on our mindset or way of thinking, which in turn influences our behaviour..

Financial self-efficacy refers to the capacity of an individual to achieve his/her financial goals based on the discipline that they demonstrate in money-making decisions. If you were not exposed to financial responsibility from an early age or have the tendency to spend rather than save, then a regular savings account with a debit card access becomes easy prey for frequent withdrawals. On the other hand, a high-yielding savings/investment account is not as easily accessible as there is no access to debit cards.

A regular savings account is often subjected to monthly fees. However, there is deposit insurance and earnings are guaranteed. A high-yielding savings account should be considered if you seek to maximise returns on your savings. It’s a low-risk account and therefore this type of account is ideal for investors who want to avoid losses and the volatility of the stock market and therefore offer a safer option and predictable option. The high interest savings account is necessary for short-term goals such as saving for a deposit for homeownership. Recently a young investor decided to transfer funds from a savings account held at a commercial bank to start a US-dollar high-yielding investment account, in keeping with his financial goal for the deposit of his home in two years.

Both a regular savings/traditional account and a high-interest savings account are important. Your choice of accounts is dependent on your financial goals. If you are seeking to build an emergency fund or earn current income then a high-yielding savings account is a good choice. However, to grow your money for the long-term funds should be invested in a diversified portfolio of assets and should include stocks that have proven to beat inflation with time. A professional financial advisor can assist in making the right financial decision that best suits your goals.

Grace G McLean is a financial advisor and retirement specialist at BPM Financial Limited. Contact her at: gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com