I’m always distracted by visions of becoming a millionaire. I walk down the street daydreaming about accidentally finding a case filled with thousands of dollars, or other scenarios where I get heaps of money for doing nothing. But of course, wishing for money to fall into my lap is useless, which is why I am spending my summer vacation working at The Phnom Penh Post and not lying on the beaches in Sihanoukville.

Regardless of how you come about it, deciding what to do with your money is almost as important as getting it in the first place. There are so many options these days, it can be overwhelming. The two most important factors are the security of your money and the potential benefits. To make some sense of the financial world, I decided to snoop around and determine where the best place to put your money is, in case you stumble upon a bag full of cash or start a super-successful business.

Riel or Dollars?

One decision you have to make, regardless of where you put your money, is whether to keep it in Cambodian riel or US dollars. Unlike other countries in Southeast Asia, Cambodia’s domestic currency (riel) is tied to the US dollar, meaning that the value of the riel in relation to other currencies around the world is dependant on the value of the dollar. As we have seen this year, however, the riel is still susceptible to devaluation.

The National Bank of Cambodia has bought over US$40 million worth of riel this year in order to increase demand. In the past, this technique, based on basic principles of supply and demand, has been effective at keeping the riel stable, and most economic experts predict that the riel will recover once again.

But the riel is still a less stable currency that the US dollar, and therefore most financial institutions provide higher interest rates on deposits made in riel. If the riel remains at its current value, it is obviously a better choice, but you also have to consider the possibility that the value of the riel might fall, which means that regardless of the interest you have gained, your initial deposit could be worth significantly less than the money you put in. There is no right or wrong, and investors use both riel and dollars, you just need to do your research and recognise the risk and benefits involved.

There is no right or wrong when it comes to where to put your money, and there is no way to guarantee future wealth, but we hope that a brief overview of the options will help you make an educated decision when you have your own money to manage.

Commercial Bank Deposit

Setting up a saving or checking account is the most common way of storing money the world over, and although Cambodian’s have been historically skeptical of entrusting their money to private institutions, the growth of banks such as ACLEDA is proof that many Cambodians have faith in the country’s rapidly developing banking sector.

According to In Channy, the president and CEO of ACLEDA Bank, 1.3 million Cambodians now keep some of their money in banks, and in his opinion this is a wise choice. “People can gain interest on their money when they use a bank account,” he said. “But if they keep their money at home, they will get nothing.” ACLEDA offers 7 percent annual interest on riel deposits and 4.5 percent on US dollar deposits with a minimum deposit of $10.

Banks also provide peace of mind and convenience to their customers. You don’t need to worry about your money being stolen or lost, since any legitimate bank insures deposits so that even if the bank were to get robbed or burn down, you would still get your money back. Banks today also provide ATM cards so that you can access your money 24 hours a day.

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Microfinance Institution Deposit

Microfinance institutions have taken off in Cambodia in the last decade. While they vary in structure, size and mission, most MFIs are established to give loans to middle- and low-income people who would otherwise find it very difficult to get money to start a business, build a house or become financially independant.

While MFIs are often thought of for their outgoing money, they are also worth considering as a place to deposit your money. Angkor Mikroheranhvatho Kampuchea is one of many MFIs who offer relatively high interest rates on deposits in order to expand the size of their portfolio and the amount of money that they can lend to the country’s rural poor. For an 18-month fixed-term deposit (meaning you can’t withdraw your money for a certain period of time), AMK offers some of the best interest rates in Cambodia at 12 percent on deposits in riel and 8 percent on US dollar deposits.

Besides preferable interest rates to commercial banks, putting your money in an MFI can contribute to the social improvement of the Kingdom. You can research the social impact and accountability of Cambodias MFIs at themix

.org to make sure your money is being well-used.

Sim Senacheert, general manager of Prasac Microfinance Institution, said that “people can use money for establishing new businesses and expanding old ones, and they can use the profits from their business to raise their quality of life and send their children to school.” Prasac offers 8 percent annual interest on riel and 6.5 percent on dollars for fixed-term deposits over 12 months.

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Investment

Investing in a start-up business or starting a business yourself is one of the riskiest ways to use your money, but it can also be the most rewarding. Many people can’t stand to see there money sitting still, and therefore seek out an entrepreneur, company or business opportunity that they think will succeed.

Nehk Dang, the general manager of DHC Freight Co Ltd, pooled his savings with a group of friends to start a transportation company that is now quite successful.

Using your money to start a business is risky, and even a good plan can end in failure. The success of a business depends on the way the company is managed, said Nehk Dang, but failing in business can be a lesson for future successes. “Obstacles always exist in business. We have to have strong commitment to achieve success,” he said.

“Running a business has changed my families condition, and also contributed to more employment in the country,” adding that the taxes he pays to the government also helps his country.

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Tongting (Group Banking)

Tongting is an age-old group savings scheme that is quite popular among lower- and middle-class Cambodians. For people who aren’t able to get a loan from commercial banks, Tongting offers participants a chance to take out a loan when they are in need of money.

Each month, members of a Tongting group must pay a certain amount of money to the group leaders, and in return they are eligible to request a loan from the pool of savings. It is then up to the group leader and the other members to decide if their need is urgent enough to warrant a loan.

Phoung Kousomany, a small-time seller and chief of Tongting group, is responsible for collecting money from her group members every month. The 28-year-old said that she can’t get loans from banks for her business because the interest is too high, so Tongtin has allowed her to get much-needed money for her business. The 13 members of her group pay $50 a month, and she said that after 6 months of cooperation, everything has run smoothly.

The advantage of Tongting is that group members can decide on the interest rate and length of loans given to their members, making money accessible to everyone.

However, members must put a great deal of faith in the group leader. Stories of group leaders running off with savings are common, and make many people wary of this cooperative approach to savings.

If you do decide to put your money in a Tongting scheme, your best bet is to pick a group you can trust. “I cooperate only with close acquaintances who I know very well,” said Phoung Kousomany. “So I’m not afraid of anyone cheating.”

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What do you think is the best was to manage money? Let's us know at angkorone.com/lift