Ina Opperman

By Ina Opperman

Business Journalist


How to cash in on higher interest rates

High interest rates mean financial pain for consumers who have debt, but it is very good for consumers who have savings.


While South Africans are cautious about their finances amid the uncertainty of the current economic environment, they can cash in on higher interest rates.

In addition, the cost-of-living crisis has prompted a behaviour shift in the spending and savings habits of South Africans as people are concerned about having enough to make it through the month and having a buffer in case of another potential financial storm or shock event, Thopi Mhloli, head of savings and investments at Standard Bank, says.

“While rising inflation has resulted in a relentless cycle of higher interest rate hikes that places significant pressure on South Africans with debt obligations, higher interest rates also worked in favour of savers, especially if you have a bigger savings pot.”

Mhloli says people who can save and invest are in a fortunate position as interest rates are helping to accelerate the growth of their savings. As it stands, most interest-bearing accounts are offering more than 7% interest on money invested.

ALSO READ: Seven tips to help you deal with rising interest rates

Interest based on current rates

“For consumers who are in the fortunate position to save, there is an opportunity to cash in on higher interest rates by opening a retail savings or investment account that pays interest based on current interest rates in the money markets, with monthly interest compounded on the balance.”

He says consumers should look for the best rate in the market at up to 8.7% growth, with no account fees, that offers access to your money anytime, protection from the risk of market fluctuation and the option to transfer the interest earned to any other account.

“The higher interest rates in the country are pushing the yield on these kinds of accounts higher, enabling people to build their savings faster over a shorter time. We know saving is hard, especially in trying economic times, but consumers can put money away and get so much more bang for their buck with these accounts.”

Mhloli says this kind of account is good for consumers who want to meet long-term as well as short-term financial goals, whether to build an emergency fund or to saving for retirement.

“Financial service providers must understand that consumers are concerned about their financial future due to mounting pressure on the local and global economy. That is why banks must continue to assist consumers with opportunities that can help them mitigate the impact of the depressed economic environment on their financial positions, while supporting their ability to meet their life goals.”

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