Most people usually have an amount of money saved to cover needs that may arise from unforeseen events or ensure, for example, the studies of our children. The ideal, therefore, is that we can extract the greatest possible return from these savings. There are different investment alternatives but the product that, par excellence, is usually the choice of many savers are bank deposits.
What is a bank deposit and what types are there?
A bank deposit is an investment financial product through which a certain person -whether physical or legal-, delivers a normally idle amount of money, to a financial institution with the objective of recovering in an agreed term the interests that money has generated with the conditions agreed in the contract formalized at the time of opening the deposit.
These bank deposits are one of the four main sources of financing available to traditional banks. The bank needs to finance itself to develop its activity and the contributions of the savers are very important to subsequently be able to lend money to third parties in the form of loans https://greendayonline.com/i-need-money-now/i-need-money-desperately/.
Types of bank deposits
Bank deposits can be of several types:
- Current account: Also known as a demand deposit, they are a type of bank deposit that allows money to be deposited in a financial entity, acquiring this obligation to return it to the client at the moment in which it is required. In exchange for this deposit, the financial institution usually offers the client an interest rate based on the money available in the deposit. Although it is the entity itself that decides whether or not to offer a remuneration to the client based on the money deposited. This type of bank deposit has intrinsic a “cash service” through which certain payments and common charges such as withdrawing cash or making bank transfers can be made.
- Savings account: This type of bank deposit is very similar to the previous one, but with the difference that the financial institution gives its client a savings book where the movements made in the account can be noted. The availability of money is less than in a current account but the profitability that can be obtained is greater.
- Time deposit: When we talk about the term deposit we refer to the term known for all fixed term. In this, the client gives the financial institution a certain amount of money in exchange for obtaining an interest rate and can not withdraw until a certain date, which implies the inability to dispose of the money during the period previously set with the entity. In case the client wants to recover his money before the agreed date, he may receive a penalty from the financial institution which will reduce the profitability of the deposit.
Investment alternatives to bank deposits
Currently, the interest rates offered by banks for depositing an amount of money are very low, reaching historical levels in both Spain and Europe.
According to the Bank of Spain in new hires, fixed-term bank deposits are hovering at an average interest below 0.15%.
Faced with this situation of uncertainty and low interest rates, savers seek alternatives to bank deposits in order to make money profitable.
Below we show four alternatives to bank deposits that the market offers to achieve higher profitability:
Invest in shares of companies that offer high dividends
Being able to receive a return of approximately 4% per year to invest in companies that operate in the stock market. As we can imagine, the risk in this alternative to deposits is much higher than in the case of, for example, the fixed terms since here it will depend constantly on the fluctuation of the stock market.
Invest in fixed income: invest in bonds and bonds of solid companies.
While it is true that the interest rates received in exchange have also dropped considerably in recent times. We speak for example of the treasury bills that in many cases offer even negative returns.
This alternative to bank deposits is a saving instrument that is generally guaranteed at the expiration of the contract and has slightly higher interest rates than those offered in bank deposits but with longer terms. In this case, as in the fixed terms, the customer is usually linked to the operation for a certain time, which is generally above five years, assuming a series of penalties in case of withdrawal of the amount.
It is one of the alternatives to bank deposits more widespread in recent years. Thanks to crowdfunding platforms, investors can obtain returns that are considerably higher than bank profitability. This alternative to deposits consists of investing in projects of companies or individuals that need financing. These investment platforms can be of different types:
- Crowdfunding of reward: It consists of the contribution of money on the part of a crowd of people to projects, that usually are of artistic or cultural character in exchange for a reward for their contribution. In this type of crowdfunding tend to appear in a large number of projects that integrate the innovation factor, arising through this alternative to deposits, products that usually tend to have a great acceptance.
In order for this investment alternative to be successful, the rewards must be worked well, following the 4 golden rules on which this type of crowdfunding is based.
1 GTA rule: the rewards must be as generous, tangible and abundant as possible.
2. Rule of the power of the free: the rewards have to be exclusive, limited and valuable for the investors of the project.
3. VIC patron: from the sum of the two previous rules, this third arises, which suggests that the investor of the project must be much more than a mere client.
4. Rule of B2Crowd: it is based on the importance that the campaign through reward crowdfunding has a reward that really satisfies a large number of people.
- Crowdequity: Investors lend their money to companies in exchange for a share in the company and the right to share in the profits. As in the case of reward crowdfunding, equity has a great technological base to connect investors and entrepreneurs or companies that seek to finance a specific project through this investment alternative.
- Crowdlending: Consists of people who lend their money to other individuals and companies in exchange for obtaining a return for their money.
MytripleA is the only crowdlending platform that offers to invest in loans guaranteed by Reciprocal Guarantee Companies (SGR), thus being a very competitive product in terms of safety and profitability of bank deposits. For the security side, they have the guarantee of the SGRs, the subsequent reaval of CERSA and finally by the FEI. And, in terms of profitability, they range from 2% + Euribor (if this indicator has a negative value, it will be taken as zero without reducing the initial 2%).