Get Serious about Saving

Whether you’re building your emergency fund or putting aside some money for a specific large purchase, you may feel tempted to open a savings account with a commercial bank. That would be a mistake. While it may seem intuitive to save in savings account, the reality is it’s probably one of the worst places to keep your money if you actually want it to grow. Sadly, money that sits in a bank account loses its purchasing power over time, with no chance of keeping up with inflation. 

On the other hand, a credit union (CU) offers many benefits to savers that far exceed anything that commercial banks ever could in Trinidad and Tobago. While commercial banks care more about maximising value for their shareholders than for their customers, a CU exists to serve their members, who are the same people who use their services.

Here’s why you should save with a credit union if you want to get serious about saving:

Earn Better Returns  

It’s almost insulting what banks try to pass off as interest on their savings account, considering how many millions they make in revenue. Interest rates can range from 0.01% to 0.50% per annum (for balances below $200,000) which pale in comparison to what you can earn from a credit union. If you save in a CU shares account, you can potentially earn an annual dividend of 1% to 4% and even beyond that; it all depends on how well the CU performs that year and whether there was a net profit so that dividends can be distributed to members who held funds in their shares account. If you don’t like the idea of returns that are not guaranteed, you can also consider a CU deposit account instead which may give anywhere from 0.25% to as high as 2.75% per annum in interest. That’s WAY more than you could ever dream about getting with any bank account! And there are usually no monthly account maintenance or withdrawal fees that work against your efforts to save like there are with most bank accounts.  

Seriously, if you want to be rewarded for saving, save with a credit union. Apart from offering or having the potential to offer higher rates, CUs also calculate the dividends you are entitled to more fairly. While banks typically stipulate minimum balances that must be maintained or use the lowest balance that you held in your account to calculate the interest due, CUs use the average monthly balance of your shares account when determining your dividends. That means you’ll still get a decent return if you kept a high balance for the majority of the year but ended the year with a low balance; duration matters. In contrast, banks seem to always look for ways to pay you the least interest that they possibly can. 

Enjoy Peace of Mind 

Savings accounts at commercial banks enjoy up to $200,000 in deposit insurance coverage so they may seem attractive if you can’t bear the thought of losing your hard-earned money. But did you know that some credit unions are covered by deposit insurance too? If any of those credit unions go into liquidation, all of their members will receive protection of their unencumbered funds of up to $125,000 on shares and $50,000 on deposits.   

Don't Sacrifice on Convenience  

Still, you may be reluctant to move your cherished savings out of your bank because you think that you’d lose easy access to it. However, most credit unions have online and even mobile banking available so you can keep a watchful eye on your nest egg as it grows. Many of the larger CUs also have Visa or LinCu MasterCard debit cards that you can use to access your funds. Some CUs are registered online banking payees with First Citizens Bank, Republic Bank and/or RBC Caribbean Bank so you can easily make contributions to your CU shares or deposit accounts without incurring online transfer fees. A few CUs even facilitate online requests for transfers from your shares account to your bank account. More and more, credit unions have been able to match the convenience services offered by banks, while rewarding you more and charging you less. 

So, who should you save with? 

While there are only 7 commercial banks who you can save with, there are well over 50 credit unions you can choose from. Some allow anyone to join, and others have strict membership criteria e.g. being an employee of a certain company or group of companies. Typically, the ones open to the everyone are larger, have more branches and offer more products and services while the private ones tend to have higher dividend rates. It’s up to you to do your due diligence so that you can choose wisely.  

When evaluating a credit union, consider how long it has been in existence and whether it has a loyal membership base. You'll want to choose one that is stable who promotes and manages their loan portfolio well so that they can generate profits and declare dividends every year. Ensure that they publish their annual report with audited financials and hosts their AGM in a timely manner every year. That would give you an idea of how organized their leadership is.

Once you switch to saving with a credit union, you'd never leave a cent in a "savngs" account again!