The unstable economic situation, the depreciation of the national currency, and rising prices for various goods inevitably lead individuals to consider ways to preserve and increase their personal savings. The first thought that comes to mind is a bank deposit. However, the closure of banks and issues regarding the return of funds raise doubts about the profitability of such investments.
But is the situation really that grim? Where is it best to store money?
To shed light on these questions, we turn to Sergey Tereshkin, the founder of OILResurs, who has extensive experience in financial operations and asset placement. Learn more about the entrepreneur on his website sergeytereshkin.ru.
Where to Store Money
So, funds can be stored in the following ways:
- at home;
- in a bank;
- in a microfinance organization (commonly referred to as an MFO).
These are the most common methods of storing assets. Some of them can also increase capital. Keeping money at home helps avoid losing it, but simply placing it "under the mattress" will not increase funds.
Before choosing one method of capital preservation over another, it makes sense to examine each one in more detail.
Storing Money at Home
According to Tereshkin, every person should have what is referred to as a "financial cushion." This cushion is necessary in case of job loss, vacations, etc. With it, individuals can easily manage until their next financial inflow. The size of the "financial cushion" depends on the age of the person:
- for young individuals, it should be at least three months' salary;
- for those aged 30 to 40 years, the saving should total six months' salary;
- after the age of 50, one should have nine to ten months' salary set aside.
The older a person is, the larger their reserve should be. This is due to the challenges associated with finding new employment.
To accumulate such a reserve, at least 10% of the monthly salary should be set aside in a "piggy bank." Ideally, this figure should be 20% or more.
When storing money at home, it is important to understand that it can be stolen at any moment. Burglars can easily locate hidden funds, especially in apartments. Homeowners can bury their savings on their property, but there is still a risk of discovery.
An optimal solution is a safe with multiple levels of protection. Burglars would require time to break in, which is generally enough for police or security services to arrive. The premises should also be equipped with an alarm system connected to a monitoring center.
This method of storage will not help grow capital; it is solely focused on preserving funds.
In the Bank
A bank safe deposit box can be leased to ensure the user's funds are secure from theft. However, this method of saving money does not contribute to capital growth. To earn income, one should consider a deposit account. It is advisable to deposit funds in government or reputable foreign financial institutions, as the likelihood of bankruptcy in such banks is minimal.
Deposits can be placed for various terms. The longer the term, the higher the annual interest paid to the client.
Interest can be received monthly or at the end of the deposit term. The choice depends on personal preferences and the necessity for monthly cash flow.
It is essential to know that if a customer terminates the contract early, they will lose the accrued interest. Therefore, if there is a risk of needing the entire sum in the near future, one should avoid long-term deposits, preferring terms of 1-3 months instead.
Additionally, the interest rates for deposits in dollars, euros, and the national currency can vary significantly. Rates in dollars and euros are considerably lower due to devaluation risks.
It is also crucial to carefully read the contract. Often, banks include a clause regarding automatic renewal of the deposit. In such cases, the client may be unable to access their funds for an extended period, especially if the financial institution encounters liquidity issues.
Furthermore, banks might impose high fees for withdrawing funds, significantly reducing the benefits of placing a deposit.
Microfinance Organizations (MFOs)
Recently, microfinance organizations have emerged in the market, offering individuals a way to invest their money. This method of investment resembles traditional bank deposits but typically offers higher returns, with interest rates ranging from 20% to 25%, and in some cases even higher.
This investment method serves as a middle ground between traditional investing and stock trading.
Profit levels often depend on the amount invested. Most companies set a minimum investment threshold below which funds cannot be placed.
The investment period can vary from 1 to 12 months, with users choosing the timeframe that best suits their needs.
Whether to trust such companies is a personal decision. However, it is vital to understand that many microfinance organizations offer unsecured loans to users, which always poses a risk of non-repayment and potential bankruptcy of the firm, resulting in losses for investors.
In Which Currency to Hold Money
Regardless of the storage method, it is recommended to hold funds in a strong currency, such as dollars or euros. This precaution helps avoid the risks of currency devaluation. No matter how the exchange rate fluctuates, individuals will not suffer losses.
Similarly, it is advisable to place deposits in a strong currency. In this scenario, individuals will remain profitable regardless of market fluctuations. During devaluation of the national currency, its decline can entirely offset the gains from a deposit, and in some instances, the returns may not even cover losses from exchange rate differences.
When selecting a method for storing money, it is essential to weigh all the strengths and weaknesses of each approach. It is advisable to trust only established organizations with a long-standing presence in the market and a solid reputation among investors. Otherwise, there is a risk of losing one’s funds.
