How much interest does a savings account earn?

Posted by Felix Okoli on Thursday December 13, 2012 at 10:32:28:

Putting money in savings account may not be the best way to make money in Nigeria unless you really just have excess money lying around and just want to put it somewhere to remain useful and earn passive income.

Those days in secondary school, we used to dream of just making big money and then applying a bit of mathematics by investing it in a savings account for interest. In reality however, the interest on a savings account in Nigeria is more like negligible when you compare it with the growing rate of inflation and profitable business opportunities that earn more.

Anyway, if you do have some money in your savings bank account, you should probably want to know how interest rates work on them and how your money can grow with it.

A savings account is one of the most basic forms of bank account in our economy and it is merely an account that lets you save and grow your money while at the same time allowing you to have access to it. A savings account is a safer way of storing money without letting it lose value or get stolen.

How much interest do Nigerian banks pay really on a savings account?
Well, it is really small but can also be big depending on the bank you bank with. If you really do intend saving money in a bank account for good profit, then you should look into CBN's monthly report of banks that offer the highest interest rates.

So the interest rate on savings account in Nigeria varies from bank to bank and based on the report I've seen, it ranges between 1% to 3%

In fact, here are five banks that pay the highest interest rate for savings as at August 2012

Top interest paying banks:
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- Standard chartered 3.5
- Diamond bank 3.3
- Fidelity 3.0
- Unity 3.0
- Sterling 2.5

3 banks that offered the lowest rates include:
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Skye 0.04%
First bank 1%
UBA 1%

How do interest rates work on a savings account?
It grows the value of money in a savings account by a factor which is based on the interest rate per annum and most banks tend to pay such interest on a monthly basis and probably for a minimum amount of deposit.

So, let's assume that you've got N100,000 in a savings account that pays 3% interest rate per annum, that implies that the N100,000 initially invested would earn N3000 annually and for every month, it would earn N250.