Apartment Association Chairman: If There's an Opportunity to Put Money in Savings Earning Interest, It's Worth Using
If a cooperative has reserves, they must definitely be put to work, and a savings account is the right place for that, because with an apartment building cooperative, you never know when money might be needed, says Sergei Razgonjajev, a member of the board of the apartment building cooperative located at Kaupmehe Street 11 in Raadi district in Tartu.
The reasoning of the cooperative manager with a total of 32 members is simple – by keeping money in a current account, it just sits idle while the 3.3% interest on a savings account would slowly but surely grow reserves. "The building renovation fund has been collected just in case, but we don't need that money today or tomorrow. When that time comes, we can withdraw it from Bigbank's savings account in just one day," says the cooperative manager.
According to Razgonjajev, he learned about Bigbank's savings account product through an email that reached the cooperative. "We didn't need to think about it for long, everything seemed safe and entirely reasonable. I still checked just in case whether and what interest other banks offer a similar product and whether there might be some hidden catch or secret service fee that would eat into our gain, but there wasn't – Bigbank's offer of 3.3% was clearly the best on the market," he explained. For bank deposits aimed at similar apartment building cooperatives and also companies, the next best offer on the market is currently 2% interest per year, which means more than a third lower interest yield.
The cooperative's accountant also confirmed to Razgonjajev that he has other similar clients from cooperatives holding free funds, and that financially it is a sensible course of action. Essentially no bureaucracy comes with this step, because the decision-making is purely within the competence of the apartment building cooperative's board, since the money is not being used, but simply transferred from the current account to the savings account.
"From the cooperative's perspective, I also like the fact that money ticks a little bit every day, you see it accumulating in your account and once a month the interest is transferred to your current account, rather than having to wait until the end of some longer period for interest to be received. There is also no risk that if for some reason you need to withdraw some or all of the money in the meantime, you lose the accumulated interest due to breach of contract. Bigbank's savings account logic and approach is very sound in today's economic environment," explained Sergei Razgonjajev, a member of the board of the apartment building cooperative from Tartu.
According to Aimar Roosalu, head of Bigbank's corporate banking unit, the use of savings accounts developed for companies is indeed an effective money management tip for apartment building cooperatives as well. "Money is available in case unexpected expenses arise in connection with the building, but an interest rate of 3.3% helps keep pace with inflation and generates additional income for the cooperative," he noted.
"For larger cooperatives with several hundred apartments, there can be six-figure amounts of free capital at any given time – whether it's reserves against unexpected technical system failures, collected renovation funds or own contributions for renovation undertaken through support measures. The common concern for cooperatives is usually that they don't want to lock money in fixed-term deposits, but practically no interest is earned on money sitting in the current account," said Roosalu, who believes that both apartment building cooperative boards and members' general meetings should pay more attention to the financial management opportunity offered by savings accounts. It is also important that there is less risk compared to other investment options, as bank deposits are guaranteed by the State Guarantee Fund up to 100,000 €.
