Savings accounts, unit trust, long-term investments, fixed deposits… the list seems endless. While your options may differ from bank to bank, here we outline minimum deposits and benefits for the four most common ways to save your earnings.
What is most important, says Keith McIvor, Absa’s customer market solutions managing executive, is that you save at least 10% of your nett salary. ‘A little bit of extra money will protect you against future financial hardships and put you in control of your long term financial future.’ Whether you’re already thinking about your retirement, want to take that sought-after trip to the Zanzibar or simply must have that cashmere trenchcoat for winter, you need to think about saving first.
GENERAL SAVINGS ACCOUNT
Minimum Deposit: Between R20 and R100 depending on who you bank with.
Hiding your spare cash in a Jimmy Choo shoebox under your bed is not a good way to save. You want your money to be accessible, but you also want it to be safe. There are loads of savings accounts to choose from, all of which generally don’t come with excessive bank charges at the end of the month. You can make deposits and draw as much money as you want at any time,’ says Lezanne Human, CEO of Savings and Investment at First National Bank.
Treat your savings account as an emergency fund. ‘An emergency fund is a savings account with enough money to cover five to six months of your living expenses,’ says McIvor. Always remember to make sure your money is easily accessible and not subject to long notice periods, he adds.
32-DAY CALL ACCOUNT
Minimum Deposit: +R100
If you’re an impulse shopper, this savings plan is for you – because you can’t simply make a withdrawal when you feel like it. ‘A 32-Day notice period is required for withdrawals,’ says Human. ‘The interest rate increases after the first 32 days, and again after 64 days, provided that there is no notice to withdraw your funds.’ So, try and keep your savings locked up – the longer you leave it in this account, the more interest you earn and the more you save.
FIXED DEPOSIT ACCOUNTS
Minimum Deposit: Between R100 and R1 000 depending on who you bank with.
Risk: Flexible Fixed Deposits – None; Inflexible Fixed Deposits – Low
While a flexible fixed deposit is similar to a 32-day call account, you are able to benefit more from interest rates with the former option. ‘The interest rate is linked to the prime lending rate and interest is calculated on a daily balance and paid monthly,’ explains Human.
Inflexible fixed deposit accounts are for those of you who are a little more serious about investing your money. You must have between R1 000 and R10 000 available before you even think of opening this account. Your money is secure, says Human. But, she advises, remember that you are not allowed to make any withdrawals or deposits within your investment term, whether it be one month or 60 months, so think carefully before choosing this option. Make sure it fits your saving needs.
MONEY MARKET ACCOUNTS
Minimum Deposit: + R10 000
As with fixed deposit accounts, money market accounts can be flexible or inflexible, however both options will generally allow you immediate access to your money, so there won’t be any worries about getting your hands on your savings if desperate times arise.
IMPORTANT SAVING TIPS TO REMEMBER:
McIvor points out some important facts to remember when you start putting your money away.
• All the accounts except general savings require a monthly amount be deposited – depending on your bank, the amount you choose to deposit each month is your choice.
• Once again, aim to save at least 10% of your nett salary.
• Remember these two words: Compound Interest. ‘If you start saving today, you will start earning interest immediately. Next month, your savings will be more and you will earn interest on that interest every month. Compound interest is the eighth wonder of the world.’
• Take inflation into account when you’re saving. ‘The amount of money you save every month should increase by at least the inflation rate in order to ensure that your savings grow at a steady pace.’
• When you receive lump sums, save before spending.
• Have a conservative spending plan and identify the unnecessary expenses. Don’t buy two pairs of shoes if you can’t afford them… no matter how much you want to add them to your wardrobe!
• To keep yourself in check, have the amount of money you want to save deducted automatically from the account in which your salary is paid. While you might be able to rely on yourself most of the time, a debit order is probably a good idea when sale season starts to loom.