THERE are two ways to make your money grow in a savings environment and the first, most obvious way is to save more. The second is to get the best interest rate possible. Many people open an account and tend to forget about it for years, not realising that they may be depriving themselves of income.
“Having the right kind of savings account for the right kind of objectives is critical. If you save cash in your cheque account, for example, you could be giving up on 4 per cent or 5 per cent interest and this will make a huge difference to your returns over the long term,” says Nitesh Patel, Head of Customer Financial Solutions; Personal Banking at Standard Bank.
Standard Bank recommends the following methods of saving and investing your income:
- A flexible savings account does not mean low interest rates
If you need access to your savings, you can have the best of both worlds; a good interest rate and the ability to transfer cash from one account to another without penalties or limitations. Speak to a consultant at your branch, your personal banker or your financial advisor to find the best account to suit your needs.
- Take advantage of your company savings plan
This is a pooled investment account provided by an employer that allows employees to set aside a portion of their gross salary for retirement savings or other long-term goals, such as paying for tuition or purchasing and extending a home.
Look at your employment contract to see if your company has a savings plan, as some companies will match what you save. For example, if you save 7.5 per cent they will equal it. It’s a good idea to take advantage of this.
- Look at a stock portfolio
While bank savings accounts are a great place to save for short and medium-term goals, investing in equity-based products is another option which may potentially give you higher returns, but does have an element of risk associated to it. If you don’t want to become a stock mogul, consider investing in unit trusts or SATRIX. By doing this, you get the benefit of earning good returns while experienced managers make the stock decisions. We strongly recommend talking to an accredited financial advisor who can assist and guide you on an appropriate investment approach tailored to your needs.
- Fix your savings for good returns
You can earn higher rates of return on your savings if you are prepared to keep your money in a fixed deposit account.
However, you must be sure that you won’t need this money for the duration of the term to which you commit. Some types of fixed deposits don’t allow early withdrawals and may charge penalties.
Once you have chosen the best solutions for you savings needs and goals, create and maintain habits that will make sure you continue to save and your money continues to grow. The three helpful tips below will assist you:
- Invest your additional income
When you receive extra income, such as a bonus or 13th cheque, you should save some, if not all of it. For example, invest any additional money into a retirement fund for you, or an education fund for your children. Another good idea is to pay off or reduce any short term debt such as loans, etc.
- Consider the impact of inflation
When you have money invested in accounts that are impacted by inflation, you need to keep an eye on how it is affected. The easiest way to ensure that money keeps up with inflation is to increase your savings by at least the rate of inflation each year.
Also aim to increase you retirement savings as your salary rises. If you are consistent, you should be able to retire in comfort.
- Be consistent with your savings
Perhaps the most important strategy you should adopt is one of discipline. You can earn more if you can commit to paying into a savings account regularly.
“If you implement all of the above tactics, you’ll be pleasantly surprised to see how much you have accumulated over time. The longer you leave your money invested, the larger it will grow,” concludes Mr Patel.
