This post was written by banker Sean Hamilton. Sean is a local banker with over 18 years of experience in the field. This post has been gifted to Maori Millionaire in hopes to share the value in understanding basic concepts like 'banking' in order to improve our financial literacy. Maori Millionaire is honored to share this post by Sean and is excited to see more from him.
Like all our posts, our information comes with a disclaimer.
Disclaimer: The information in this article is provided as general information. It is not intended as financial advice for the purposes of the Financial Services Legislation Amendment Acts 2019 (FSLAA). No investment objectives, financial situation and particular needs of any particular person has been taken into account in the publication of this article. Professional advice should always be sought before taking out any financial product.
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Empowering Others by Understanding Banking
Kia Ora, my name is Sean and I’ve worked in banking for the past 18 years. In my career at one of the major banks in this country, I’ve come to understand that most people who don’t work for a bank, don’t always understand how banks work.
Why is this important?
To make yourself as financially independent as possible, you need to know how banks work, so you can maximize the return on your money.
This return on money is how wealth is created. Bit by bit, cent by cent, dollar by dollar. It can come in all kinds of different ways. It could be savings on fees, how to get the best lending interest rate (which in turn saves you money), or get a good rate on your deposit funds. All of these are relative to your experience when dealing with a bank and value as a customer.
In order to achieve the best out of a relationship with a bank, you also need to know what’s in it for them.
I want to share from my experience in banking, to help out others. At the end of the day I want to help Maori be financially confident. An empowered people are those with knowledge, and knowledge flows from those who have walked the path before.
I will explore different types of banking products that come up in everyday use. I want to touch on bank accounts, debit cards, credit cards, personal loans, home loans, savings accounts, term deposits and KiwiSaver.
Banking 101 – The Relationship:
First thing to know is that you will need a bank. This is a fact of modern society. Any income you earn could be paid into an account at your chosen bank. So it’s important to choose a bank that works for you.
You might need to consider things like, what products do they offer? What fees will be charged? What services will I use? Such as internet banking, banking apps, their branches, or contact centre services.
In Aotearoa we have choices to which bank might suit us, but most often, the one we sign up to as a child or that we use the most as a teenager and young adult, tends to be the one we might stick with. This can sometimes change when we take out a mortgage when buying a home, but loyalty to bank brands is fairly strong.
The good thing is, if we do want to change banks, they have to make it easy to switch as well. It tends to be, that the more products you have with a bank, the harder it can be to switch. I think it comes down to the hassle in all honesty, but regardless, the first thing we often do is open what is commonly referred to as an “everyday” account. One you will use to make purchases from and have your money go into.
The type of spending behaviours you have will more than likely determine which account might be best to use. This is because how you use your account can equal how much in fees you pay, and you’d probably want to pay the least possible, as its your hard earned money going to the bank.
This brings me to an important point that will carry through everything with your relationship with a bank. They are businesses. They are there to make money. They aren’t a charity. A strong bank makes profits and is a sign of a strong economy. They are looking to make money from your money. The whole banking system works that way and it isn’t changing any time soon. The sooner you’re comfortable with this, you can turn to trying to make it work in your favour as much as possible.
Banks want you to be happy. That way you remain loyal and take more products and they can make more profit. Again, it’s how the system works. But for the most part, they aren’t here to rip you off, otherwise, you’d leave them and they can’t do that thing they like to do, making money. A banks products are there for you to use and maximise your money though, so you need to find the balance in this relationship.
A bank is there to provide you their products and services. You pay for those products and services but manage your own finances so that you can build wealth. As this is a real long-term relationship, like any good one, it’s important to work at it and not take it for granted.
Next time we’ll talk about bank accounts and debit cards. We’ll try to see how they work in more detail and their purposes in building your financial journey.
Nga mihi,
Sean Hamilton
Disclaimer: The information in this article is provided as general information. It is not intended as financial advice for the purposes of the Financial Services Legislation Amendment Acts 2019 (FSLAA). No investment objectives, financial situation and particular needs of any particular person has been taken into account in the publication of this article. Professional advice should always be sought before taking out any financial product.