What to consider when you choose a savings service/plan
When you decide on a savings strategy, plan or account, there are various factors that you need to keep in mind to ensure that you are making the best decision.
Consider the following:
- Convenience and ease of use
- Opening deposit requirements
- Interest earned on savings
Different ways to save or invest
You might think that keeping a shoebox under your bed with all your monthly savings is the only and best way of saving, but there are many ways to save every month.
- A simple, flexible savings account. This account allows you to deposit or withdraw money whenever you want. The interest earned is not very high on these accounts, and is usually much lower than inflation.
- Inflation-beating savings accounts. Unlike the simple, flexible savings account mentioned above this account offers interest rates that are higher than inflation (do find out the costs associated with this account). This is offered by different credit providers.
- Notice deposit accounts. This account usually requires a minimum deposit as well as a minimum balance. You also need to give a defined period of notice to be able to withdraw funds from the account. In general, the higher the minimum deposit and the longer the notice period, the higher the interest rate earned.
- Flexible fixed deposit accounts. This is a lump sum saving accounts, where you deposit as much as you can and as often as you like for a fixed term. You are only permitted a specific number of withdrawals from this account within a year, or you cannot withdraw at all during that period.
- Unit trusts. Your money is invested in blue chip shares on the stock market. Unit trusts are very flexible. You can deposit as much as you like whenever you like, as long as it is more than the minimum instalment – usually more than R500 a month. They generally have higher returns than a normal savings account, but also higher charges associated with managing the account.
- Endowment policies. These are life assurance policies that are invested in various funds and is designed to pay a lump sum after a specific term (on its maturity) or on death. They have fantastic returns on investment, but carry a higher risk. You should speak to a financial planner if you would like this type of plan.
- A retirement annuity. This is a policy where you are unable to access the funds until the age of 55 to 65. Other than giving you a tax concession through increasing your yearly contribution to beat the negative effect of inflation, you will be well prepared for your retirement.
Tips to help you start saving
We know saving can be difficult, but it is definitely not impossible. Here are a few practical tips to assist you on your savings journey.
- Make saving for your future and achieving your goals a priority
- Make your savings plan part of your monthly budget, and stick to it
- Pay off your debts that have high interest rates first – these are costing you a lot of money every month
- Don’t buy on impulse. Take the money that you might have spent on your daily snack or drink and put it in a savings jar
- Speak to your credit provider(s) and try to negotiate better (less) interest on your loan(s)
- Give up expensive habits, such as drinking, smoking or gambling
- Lock away your credit cards and do not use them until you are in a more secure financial position
- Cancel any unused club memberships that you might have
- When you need to purchase a gift rather give a gift of service, such as babysitting or painting the house, instead of an item
- When shopping, try and buy cheaper brands and look out for sales
- Make a dream board. This will be a board that you put up in your house that visually represents what your goals are, for example a picture of a house or car, students graduating from university, etc. This will motivate you to stick to your savings plan.
- Tell your family and friends about your plans. This way they can be a support system and encourage you to achieve your goals. They will also stop you when you might want to do things that will hinder you from reaching your goal.
- Look for a more affordable place to live
- Grow your own fruit and vegetables if you have a garden
- Analyse your bank and cell phone accounts, and cancel any services you aren’t using or don’t need
- Never give up – it might be difficult now, but it will be worth it when you achieve your goals
Needs some more tips?
Setting financial goals
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