In today’s complex financial world, maintaining an appropriate bank balance across different types of accounts is a fundamental part of personal and business money management, JOSEPHINE OGUNDEJI writes
Iya Risi had been trading fabrics in Balogun Market for over fifteen years. Her little shop was always alive with customers, from excited brides-to-be searching for the perfect aso-ebi to fashion designers hunting for the freshest lace.
Every day, she made decent sales, counting crisp notes before stuffing them into black nylon bags, then into her handbag, or on risky days, cleverly hiding cash inside her blouse.
But one scorching Thursday afternoon, disaster nearly struck. As she jostled through the crowded market exit, a young pickpocket lunged for her purse.
Heart pounding, she barely escaped with her money intact. That close shave shook her; she realised that carrying cash around was no longer safe. It was time to “join the modern world” and open a bank account.
The very next morning, dressed in her Ankara and gele tied just right, Iya Risi marched into the bank. At the service desk, a cheerful young man greeted her with a welcoming smile.
“I want to open an account,” she declared firmly. “But I don’t want one of those accounts that will be eating my money every month. I’m just a small trader, not working for Shell or Dangote.”
The banker laughed softly. “Do you know which account suits you best?”
She shook her head. “My daughter in Canada told me to open something for savings. But my supplier in China says he will send me invoices in dollars. I don’t know which one fits me.”
Choosing the right bank account, just like running a business, requires understanding your needs and how each option works. Whether it’s a savings account for safety and small interest, a current account for daily business transactions, or a domiciliary account for handling foreign currencies, the key is to match the account to your lifestyle and business demands.
For traders like Iya Risi and many others across Nigeria, understanding how to choose and manage the right bank account is essential.
Selecting the wrong account can lead to unnecessary fees and constant frustration. But with the right account, your money stays safe, your business runs smoothly, and you can focus on growing your trade without worry.
Before opening any account, it is important to ask questions, weigh your options carefully, and choose wisely. After all, your bank account should work for you, not the other way around.
The concept of “how much should be in your bank account” goes beyond simply ensuring there is money available for daily use. It involves strategically allocating funds to maximise financial health, stability, and growth. Different account types, such as current, savings, fixed deposit, business, investment, and retirement accounts, each serve unique functions. Consequently, the optimal balance for one account may not be appropriate for another.
To determine how much money to keep in each account, it is crucial to understand their purpose, liquidity needs, associated fees, interest rates, and your bank’s policies. The goal is not just to meet minimum balance requirements but to avoid overdraft charges, build emergency reserves, enhance returns on investments, and achieve your short- and long-term financial goals.
With inflation, fluctuating interest rates, and economic uncertainties affecting purchasing power and income stability, having a proactive strategy for balancing funds across multiple accounts has become even more important. Whether you are a student, a working professional, a business owner, or a retiree, knowing the right amount to maintain in each account can make the difference between financial security and vulnerability.
The following paragraphs delve into recommended balances for various account types and the rationale behind them.
Savings Accounts: Savings accounts are primarily designed for storing funds that are not meant for everyday use. They typically earn interest and provide quick access in emergencies. Financial advisors often recommend that individuals maintain at least three to six months’ worth of essential living expenses in their savings account. This acts as a financial safety net in the event of unexpected circumstances such as job loss, medical emergencies, or car repairs. For those with dependants or in volatile income brackets, it may be wise to aim for nine to twelve months’ worth. Since interest rates on savings accounts are usually low, it is important not to exceed what is necessary in this account; excess funds can be redirected into higher-yielding investments.
Current Accounts: Current or checking accounts are the most active accounts, used for daily transactions such as groceries, utility bills, transportation, and other routine expenditures. An ideal balance in a checking account would cover one full month of living expenses, plus a buffer of 10–20 per cent to account for incidental charges and avoid overdraft fees. Some banks charge monthly maintenance fees or penalties for falling below a minimum daily balance, making it prudent to understand the terms and maintain a balance that avoids these charges. While checking accounts typically do not earn interest, their liquidity makes them essential for cash flow management.
Business Accounts: Business accounts should hold enough funds to ensure seamless operations, which generally means maintaining a balance equivalent to at least three months of operating expenses. This includes salaries, rent, utilities, vendor payments, and inventory costs. For businesses in industries with seasonal revenue patterns, a larger reserve may be required to sustain operations during low-revenue months. Business owners should also consider separating accounts for tax obligations, payroll, and emergency reserves to improve transparency and cash flow control. The right balance provides a cushion against delayed receivables and allows businesses to take advantage of unexpected opportunities.
Fixed Deposit Accounts: Fixed deposit accounts, or term deposits, are not used for daily transactions but for saving money over a fixed term at a predetermined interest rate. The balance placed in a fixed deposit should ideally be surplus funds that are not needed in the short to medium term. The decision on how much to deposit should take into account your upcoming financial obligations, the interest rates being offered, and any penalties for early withdrawal. A good practice is to ladder deposits, breaking them into different terms to create a mix of liquidity and return. This strategy ensures access to funds at different intervals while earning higher interest than a standard savings account.
Money Market Accounts: Money market accounts offer a middle ground between savings and checking accounts. They generally require higher minimum balances but offer better interest rates and limited cheque-writing abilities. The appropriate balance for a money market account should reflect short-term financial goals such as saving for a large purchase, home down payment, or a future vacation. For individuals looking for a place to park idle cash with moderate accessibility and better yields, maintaining N500,000 to N5,000,000, depending on financial goals and the bank’s terms, could be appropriate.
Student and Youth Accounts: Student and youth accounts often come with relaxed banking rules, such as zero or low minimum balance requirements and reduced fees. Nevertheless, students should maintain enough funds to cover at least a month’s worth of basic academic and personal expenses. This could range from N10,000 to N100,000, depending on location, tuition structure, and lifestyle. Developing the habit of maintaining a reasonable balance helps in budgeting and fosters financial discipline from an early age.
These accounts are often the first introduction to banking, so understanding how to manage balances here lays the foundation for future financial decisions.
Investment-Linked Accounts: Investment-linked or brokerage accounts linked to bank platforms typically don’t have a required balance but benefit from strategic funding. Investors should only transfer money into these accounts that they are comfortable risking, based on their investment horizon and risk tolerance. For high-net-worth individuals, maintaining a balance of N1m to N10m may be appropriate, especially when investing in high-yield instruments, equities, or mutual funds. The balance should be managed dynamically, increasing during bullish markets and rebalancing during downturns to minimise loss exposure.
Retirement Accounts: Retirement accounts such as pension-linked or voluntary contribution accounts require a long-term mindset. Unlike checking or savings accounts, there’s no conventional “balance to maintain” in the short term. Instead, contributions should be made regularly based on age, income, and retirement goals. For example, financial experts suggest contributing 10–15 per cent of one’s monthly income to retirement funds, adjusting upwards with age if earlier contributions were insufficient. Balances in these accounts should be reviewed annually to ensure that they are on track to meet post-retirement needs, factoring in inflation and future living costs.
Joint Accounts: Joint accounts, commonly used by spouses, family members, or business partners, should reflect mutual financial obligations. An appropriate balance would be the total of one to two months of shared expenses plus a discretionary amount for emergencies. Clear guidelines on deposits, withdrawals, and spending priorities help avoid conflicts. When used for family expenses, couples may allocate a percentage of their salaries to this account monthly. If used for managing property or investments, the balance should be enough to cover maintenance fees, taxes, and unforeseen costs.
Domiciliary (Foreign Currency) Accounts: Domiciliary accounts, which hold foreign currencies like USD, GBP, or EUR, are used for international business transactions, tuition payments, and offshore investments. Because exchange rates fluctuate frequently, determining the right balance requires constant monitoring. It’s advisable to maintain a balance that allows for at least one to three months of anticipated international spending, adjusted for market volatility. For those saving in foreign currency to hedge against devaluation or inflation, this could mean maintaining N1m or more in foreign currency equivalents, depending on their financial exposure and obligations abroad.
Ultimately, managing your bank accounts wisely is a cornerstone of financial empowerment. Whether you are running a business, saving for the future, or simply looking to keep your money safe, understanding the different types of accounts and maintaining the right balances can save you from costly fees and unnecessary stress.
For everyday Nigerians, like traders in bustling markets or professionals navigating their careers, this knowledge turns banking from a confusing chore into a powerful tool for growth and security. The right account, paired with a thoughtful strategy for managing your funds, helps you build a solid foundation for today and tomorrow.
Remember, your bank account should serve your goals, not drain your resources. Make informed choices, stay proactive, and watch your financial well-being flourish.
