Digital Savings Accounts: Should You Open One in 2024?

‍‍EDITOR’S NOTE: This is the third article in our Money254 Partner series produced in partnership with Absa Bank Kenya to celebrate the launch of their new digital savings account. To read the first article, click here. Find the second article here. For more on Money254’s editorial policy, read here.

UPDATE: Between December 12, 2023 and March 2024, the Absa Digital Savings Account will be offering a 10% per annum interest rate. More details here.  

Remember back when your piggy bank was the only place you trusted to secure your savings? Well, you have come a long way since and so has the banking industry. 

Technology has changed our relationship with money, especially in making it more convenient to access, track and spend. Chances are that today, you have used your phone to complete a transaction - even if it is simply purchasing airtime. 

While you must be very familiar with sending and receiving money and paying for services online, has the thought of saving money digitally ever crossed your mind?

In a world increasingly doing everything online, it would make sense that such an important aspect of our financial health should also be available at the convenience of our devices. Right? 

It is important therefore, as 2023 beckons, you start familiarising yourself with the digital savings accounts, how they work, their advantages and how opening one could strengthen your New Year saving goals.

What is A Digital Savings Account? 

A digital savings account is a type of savings account that can be opened, managed and operated from anywhere at any time using mobile devices such as phones and digital devices such as the computer.

It has all the features of a traditional savings account and on top of it saves one time, money and effort since all that you would have needed to do by visiting the bank branch is right at the palm of your hands. 

Understanding the Digital Savings Account

Remember the last time you were at a banking hall trying to get something done and the inconvenience that came with it?

Either you needed to go in very early and report to work a little later, or leave work earlier to catch the branch still open. Sometimes, you inevitably had to take the day off to account for delays associated with paperwork processing and queues.

How did this make you feel? Or how does the thought of having to do this sometime in the coming weeks make you feel? Not pretty, right? 

Convenience

The digital savings account embodies the mantra “Banking has to work when and where you need it.” It eliminates tedious procedures such as endless document verification, long winding queues and the need to travel to execute mundane tasks such as transferring money.

Today, you can open a savings account instantly by simply visiting a website, uploading one or two copies of identification documents and begin funding your account without ever needing to physically visit a bank branch. A few banks in Kenya have already implemented this. 

Discipline 

Good intentions count for nothing if they are not followed up with the appropriate action. And that is where the digital savings account can come in handy in helping you take action on your savings goals. 

A digital savings account can help you improve your savings discipline by allowing you to set and cancel standing orders from your phone, digitally fund the account, and earn rewards for making minimal withdrawals.

Tracking

They say, ‘what gets measured gets done’. And this doesn’t get truer than with a digital savings accounts. Your savings goals are more enthusiastically achieved when you have milestones to hit, have the ability to look back at your saving and withdrawal history and have targets to exceed. 

Digital savings accounts enable you to easily track your saving activity over months and even years to better understand your habits and improve your ability to meet your goals.

You can, for example, flag the months when you did not contribute, when you drew from your savings on a whim, maybe a standing order failed for some reason or your employer did not fund your account without your knowledge, the interest you earned, and so on from the comfort of your phone. 

This can be very motivating as you have all the information you need to take positive action in your savings journey. 

Easy Access

Why are you saving? Whether it is to build a fund for an investment you are eyeing, to build a financial cushion against unexpected loss of income, family obligations, to pay for a certification or higher education, emergencies or to take advantage of a money-making opportunity, you will agree you don’t want to be locked out of your money when you most need it.

What does someone who has Ksh200,000 saved in a digital savings account have that the guy with a 1/8-acre plot in Juja worth Ksh750,000 lacks? 

Liquidity.

If the Juja plot owner had a medical emergency that would cost him just Ksh100,000, the plot worth over seven times more would not be of much use even if they were to take a title deed loan.

If the money is needed urgently, you can pay for the emergency straight from your mobile phone without needing to sign any papers as opposed to the regular savings account that would require you to visit the branch - and as you’d well know, emergencies do not respect time, they could happen at any time and at any place. 

Zero costs, High Interest

Given that digital savings accounts do not consume bank resources as much as traditional accounts, they typically are offered with low to no costs and attract relatively high interest rates. 

Case Study: The New Absa Digital Savings Account

The newly-launched Absa Digital Savings Account inspired this article and presents an opportunity to help bring the benefits of this kind of an account to perspective.

The account, which can be fully operated digitally, offers an attractive interest rate of 9% per annum that is paid out every three months (quarterly). Let us get into the details below.

Account Opening

To open an Absa Digital Savings account, all you need to do is visit the Absa website here and;

1. Upload a copy of your National ID/Passport
2. Upload a signature specimen
3. Provide your KRA PIN Number.
   

These can be uploaded in JPEG, JPG, PNG or PDF formats. For the signature specimen, you have to make sure it is signed on a white piece of paper. 

Absa Digital Savings Account Features

No minimum balance requirement

First, unlike many traditional savings accounts, there is no minimum balance required to open the Absa Digital Savings Account. This means that you can open the account first and fund it later when you get the money. It also means if the need arises, you can withdraw the money you need with no penalties since you are not forced to maintain a certain minimum balance in the account.

Zero Fees

Operating the Absa Digital Savings Account is free of charge. There are no account maintenance fees. Neither are there any withdrawal fees as some traditional savings accounts would have. You are not charged for even withdrawing all your savings when you have reached your savings goal or need the money for whatever reason. 

High Maximum Interest

With the interest rates offered by banks on savings accounts in Kenya ranging from between 1.5% to 9%, the Absa Digital Savings Account offers a maximum interest rate of 9% making it among the highest rates of return for savings accounts offered by banks in Kenya.

Check Out the Absa Digital Savings Account Interest Calculator Here  

Compounding Interest Structure

Further, the interest is paid out once every month, which means account holders enjoy the benefits of compound interest as opposed to if the interest was being paid annually.

The prorated interest earned on the deposit amount over one month is added to the principal of the next month - which means, not only with your actual monthly contributions earn you money, but also, the interest that you earn monthly will earn interest for the subsequent months and so on.

Withdrawal Limits 

As implied above, the Absa Digital Savings Account has no withdrawal limit.

Absa Digital Savings Account Accessibility 

To manage your Absa Digital savings account, you have the following options;

1. USSD
2. Absa App - you will need a one-time visit to an Absa branch near you to set up
3. Internet Banking - you will need to make a one-time visit to an Absa branch near you to set this up
4. Via a branch visit if you so prefer.

Check Out the Absa Digital Savings Account Interest Calculator Here

Why You Should Consider Opening a Digital Savings Account

2023 is coming and you sure have big plans for your finances. You definitely want to make more money than you are making in 2022, probably it’s the year you want to make that investment you have been eyeing and most likely you want to save more, reduce wastage and by all means make big steps towards financial security.

A digital savings account is something to consider as part of this plan if you do not have one already. 

Below are some scenarios that would make for good reasons to open a digital savings account in 2023. Note these are in no way exhaustive.

• You want to save a lot from your salary in 2023 and do not anticipate making many withdrawals
• You are saving towards a goal of purchasing a fixed asset such as land but want easy access to your savings in case of an emergency
• You want your savings to earn interest, and a bonus for not making withdrawals, which may help you stay disciplined
• If being able to visually track your progress and see reasons for withdrawal or inconsistency is something that can help you stay on track with your saving goals
• Your primary goal is to save a fixed percentage of your income every month in 2023 and want to make sure you don’t fall behind - even though you are yet to decide what to do with the money

• You have joined a money-saving challenge and want an easy way to track your progress and stay on your toes
• You are primarily trying to build an emergency fund and are concerned about easily accessing your money, but also want to earn some good interest while at it
• You have been postponing opening a savings account maybe because standing in a bank’s queue seemed too much work or you just never had time to do it
• You need a new savings account for a very particular goal such a trip to Dubai with your loved ones and want to separate this money from other savings goals
• You want to get serious with your savings and a visual reminder of where you are at is the sufficient motivation you need to get out of your comfort zone.

Tell us in the comments, do you think a digital savings account is the right choice for your savings needs in 2023? 

Check Out the Absa Digital Savings Account Interest Calculator Here to learn more about this new service from Absa Bank Kenya and see if it is a good fit for you.