What you need to know to manage your money?Apr 24, 2018
Within the activities of the United Nations Development Programme (UNDP) in Egypt to achieve the financial inclusion, this content has been prepared in cooperation with the Egyptian Banking Institute of the Central Bank of Egypt, in order to raise the financial awareness and introduce the most significant financial information that must be available to all.
Definition of Financial Inclusion
Providing and expanding the base of formal financial services and products for the various categories of society (children, youth, women, rural people, low-income people, etc...), including all banking transactions at reasonable prices and in a fair and transparent manner.
A combination of awareness, knowledge, skills, attitudes and behavior necessary to take sound financial decisions and achieve financial well-being for individuals.
Financial Consumer Protection
It aims at ensuring the provision of safe financial services to consumers and their fair and transparent treatment by the financial service providers.
The importance of Financial Inclusion
Interest in the concept of Financial Inclusion has increased during the recent years, why?
- Economic and political developments
- The activity of financial markets
- Multiple market products
- The need to include the marginalized groups
The importance of Financial Literacy
- For persons dealing with the banking sector:
- Good selection of appropriate financial products and services
- Comparison of return and cost associated with each product /service
- Making rational investment decisions
- Good utilization of resources
- Avoid high-cost financial transactions
- Protection against financial risks
- Learning how to deal with financial instruments and electronic payment methods
2. For persons non-dealing with the banking sector:
- Managing financial resources wisely
- Enhancing the ability to save
- Educating individuals on the role of banks and financial institutions
- Encouraging to start small projects
Budget and planning
A budget is a plan for future incomes and expenses that you can use as a guide for spending and saving.
- Determination of the actual needs of the individual
- Help the individual/family to live within the available income framework
- Good understanding of the financial situation and avoid waste
- Preparation for unexpected emergencies
- Financial planning by providing financial records
- Improving living standards and increasing self-reliance
Budget preparation steps:
- Monitor your daily spending and keep your payment receipts.
- Gather and record all your needs and requirements.
- Compare the value of income during the budget preparation period with the value of expenses.
- Budget Balancing: It is a process of reconciliation and coordination in which the income is equal with the expense.
- Reviewing the budget planning: to ensure its success and the feasibility of achieving it.
What is savings?
Savings is to defer consumption at present time to ensure more consumption in the future.It may be deposited in bank accounts, certificates of deposit and post offices, or savings may take one of the informal saving patterns.
Why do individuals save?
- Afford difficult economic conditions
- Better planning for the future
- A safe plan for retirement
- Reservation of a house
- Vacation, buying a new car and other recreational purposes
Some savings channels in banks:
1. Saving account
- Involves an interest received by the depositor.
- Minimum threshold for opening accounts.
2. Savings Certificates
- Certificates issued by the Bank under the deposit of a certain amount of money at an interest rate with a date of maturity, which may last for 10 years.
- The withdrawal is not allowed 6 months ago in most banks.
- The rate of return depends on the period and amount deposited
- The entire deposit can be redeemed at any time before the maturity date with a return on the actual deposit period according to the Bank's current redemption rate.
Different saving channels:
Besides banks, are there other savings channels?
- Retirement plans
- Insurance plans
- Mail Saving Book
Some informal savings channels:
- Keeping cash at home
- Buying gold
Questions that must be answered before taking the decision of saving in banks
1. What are the documents and papers required to open an account in the bank?
- A copy of the Egyptian National ID card or a copy of the passport for foreigners
- Filling in the account opening request form
2. What are the points to be taken into consideration before making a savings
- Differentiating between the characteristics of the different saving vessels and channels
- Selecting the appropriate type among them according to the objectives of the saver
- The full awareness of the contractual obligations
- Choosing the appropriate bank for the values and needs of the saver
- The ability to evaluate and calculate the interest rates and types
Services and electronic bank cards
ATMs and bank cards
Banks offer various services to customers according to their needs to facilitate banking transactions, these services include: ATM services, credit cards, debit cards, prepaid internet cards, smart wallets and other services.
What is an ATM?
A communication device that provides bank customers the access to financial transactions in public places without having to visit the bank branch.
What is its importance?
- Easy access to bank services and money
- Reduce the need to carry large amounts of cash
- What are the requirements for using it?
- Bank account
- ATM card
- A PIN
How is it used?
- Put your card in the device
- Enter your PIN
- Then you can withdraw money
- Deposit of funds
- Verify your account balance, or transfer funds
Tips for a safe use of ATMs
- Ensure that the ATM is operational before inserting the card
- Ensure that there is security in the place and the surrounding area in case of need
- Save your PIN and do not keep the number written in your wallet
- If the card is lost or stolen, it must be reported immediately to the bank
- Make sure that the person waiting behind you cannot see you
- Do not count money while you are near an ATM
- Withdraw the card after completing the transaction
What is a bank statement?
- The customer receives a periodic monthly statement containing details of his banking activity either by mail or electronically.
- Transactions that may appear on your monthly statement: checks, credits, debit balances, deposits, interest, transfers and withdrawals.
Bank Cards: The difference between a debit card and a credit card
1. Debit Cards
- Linked to your personal account, either your current account or your savings account, and through which you cannot withdraw more money than you actually have in your account
- You can use it for purchases from stores, POS, or ATM cash withdrawal /deposit with no additional commissions.
2. Credit Cards
- It is a tool for payment later because it enables you to withdraw money and make purchases and pay for them sometime in the future, with an interest calculated by the bank.
- You can also use them for purchases from stores and POS
Bank Cards: Prepaid Internet Cards
- Prepaid card used in online shopping where the card is charged in cash, with the possibility of recharging the card through any branch of the bank
- The use of the card number is limited to commercial transactions via the Internet or purchasingvia the post or telephone
- This card can be issued at the age of 16 years
Mobile Money Transfer and Money Receiving Services - Smart Wallet in Banks
The Mobile Wallet offers a range of services:
- Transfer of money from a mobile phone wallet account to another mobile phone wallet account
- Payment of invoices, infractions and donations
- Buying online
- Mobile phone number
- Valid national ID card
- Filling in a Form with service providers in banks or mobile companies
Choosing payment methods: Cash payment, debit cards or credit cards
1. Cash payment:
It can include a lot of risks including loss or theft, which makes you think about using debit cards, credit cards or bank accounts, and having cash that is necessary only to meet your needs.
2. Debit cards:
An easy way to manage and track your expenses and avoid spending beyond your current balance, unlike credit cards.
3. Credit cards:
The optimal use of it helps to raise your credit rating by avoiding interest rate increase, by paying the Bank's dues on the due date.
Dealing with banks requires a good knowledge of how to manage the bank expenses.
Examples of bank charges include:
- Account retention fees
- ATM fees
- Replacement fees for debit cards and withdrawal cards from ATMs
- Fees for discount cards
- Fees for early withdrawal from savings certificates
- Fees on insufficient balances
- Overdraft fees