Saving and how interest works
Learn how savings interest, compounding, inflation, account terms and published rate dates work. Currency amounts are examples, not provider offers.
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What interest means
When you keep money in a savings account, the bank uses it, and pays you something for it. That payment is called interest. Interest is usually quoted per year, written 'p.a.', which means per annum.
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What interest means
When you keep money in a savings account, the bank uses it, and pays you something for it. That payment is called interest. Interest is usually quoted per year, written 'p.a.', which means per annum.
Example only — a yearly savings rate
Say an account pays six percent per year. Keep one hundred thousand naira there for a full year, and you earn about six thousand naira. In cedis, keep two thousand, and you earn about one hundred and twenty. These numbers are just examples.
Compound interest
Now the magic part: compound interest. If you leave the interest in the account, next year you earn interest on your interest too. Year by year, the pile grows faster. Time is your best friend here.
Starting earlier
Starting small and early often beats starting big and late.
Inflation and purchasing power
But there's a catch called inflation. Inflation is prices going up. If your money earns six percent, but prices rise faster than that, your money buys less at the end of the year than at the start. So when you compare savings, look at the rate, and keep inflation in mind.
Rate, access rules and fees
Three things to check before you open any savings account. One: the interest rate, and whether it's per year. Two: the rules. Can you withdraw any time, or is your money locked for a period? Some accounts pay more if you lock your money away. Three: the fees. A monthly charge can eat your interest.
Emergency fund and fixed savings
And keep an emergency fund, money you can reach quickly, before you lock anything away. Aim for at least a few months of your needs.
A dated rate and its source
On Afiwe, every rate shows the date it was published and who published it. Rates change, so always confirm with the bank before you decide.
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General education, not financial advice. Amounts shown in illustrations are examples only.