Grow your savings: The eight things you need to know
Don't open a savings account and forget about it, you may be depriving yourself of income.
MBOMBELA – There are two ways to make your money grow in a savings environment.
The first and most obvious way is to save more. The second is to get the best interest rate possible.
Many people open an account and forget about it, 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,” says Mr Nitesh Patel, head of customer financial solutions of personal banking at Standard Bank.
“If you save cash in your cheque account, you could be giving up on four per cent or five per cent interest. This will make a huge difference to your returns over the long term.”
Standard Bank recommends the following methods of saving and investing 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 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 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.
- 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, but be sure that you won’t need this money for the duration of the term to which you commit.
- Invest your additional income
When you receive extra income, such as a bonus or 13th cheque, save at least some of it.
- 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.
- 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,” Patel concluded.
