Paul Beadle, managing director of www.justmoney.co.za, South Africa's online guide to money, says there are a lot of low-risk options for local savers. He explains: "Compared with the US and Europe, South African banks are very safe because they are well run and have very little exposure to the debt problems hampering other banks around the world.
"And because our interest rates are high, it also means people have the potential to earn well on their savings. The banks are also keen to increase the amount of cash they have in their vaults, so there are currently a number of good deals designed to encourage consumers to save."
www.justmoney.co.za has put together some savings tips and Best Buys to help consumers find a safe haven for their savings.
Pay Off Your Short Term Debts
Justmoney.co.za says: For most of us, the interest rate we pay on debts like credit cards and store cards will be much higher than anything you could earn in a normal high-street savings or investment account - so slash you debts and have more money in your pocket, which you could then put into a regular savings account.
• Paying off a R5,000 debt on a store card charging 35% debit interest will save you R1,750 a year.
• Clearing a R10,000 balance on a credit card with a debit interest rate of 25% will put R2,500 a year back into your pocket.
Choose a Bank Account That Pays Interest
Justmoney.co.za says: Most bank accounts pay little or no credit interest on your cash, so consider a current account that will earn interest on positive balance. Alternatively check-out a rebate banking account that will re-pay some or all of your monthly bank charges if you maintain a minimum monthly balance. Depending on how you use your bank account, the money you would save on bank charges could be more than you'd earn in interest - but the minimum balance is usually quite high at around R10,000.
• The Sanlam Liquid Account pays interest of around 12.29%, which returns R102.42 a month on a R10,000 balance - but you need a minimum balance of R500 and there's a R25 monthly fee.
• The Capitec Global Bank Account pays 10% on all balances up to R10,000, so you would earn an extra R41.67 on a R5,000 balance - the monthly fee is only R3.75 and it has probably the cheapest fees around.
• Both Standard Bank and Absa offer rebate banking options, so use the www.justmoney.co.za bank charges calculator to work out if they are the most cost-effective options for you.
Save, Save, Save
Justmoney.co.za says: There are some great savings deals around at the moment, whether you want to lock your money away for a fixed period of six or 12 months, for example, or if you are looking for an account that pays a good return on your money, but gives you easy access to your cash.
• Nedbank Park-It pays 11% interest on the minimum balance of R10,000 - up to a maximum of 11.55% on bigger deposits - so your R10,000 will grow by R1,100 over 12 months. You can access your cash at any time after 14 days, so long as you maintain the minimum balance
• The FNB Restart account gives you 11.25% on all balances over R10,000 if you leave your money untouched for 13 months, which equals growth of R1,125 on R10,000, which is the minimum balance required
• The Absa Linked Rate is linked to Prime, so you currently get 12.40% for a 12 month fixed deposit, earning you R620 a year on R5,000. The minimum balance is R1,000 and you must leave your money for 12 or six months, with the shorter term paying a lower interest rate.
• With Nedbank JustSave you can earn R412.50 a year in interest at 8.25% on a R5,000 balance. You only need a minimum balance of R50 to open the account, although a lower rate is paid for balances under R1,000, rising to 10.40% for balances over R100,000
• The Absa Money Builder pays R420 annually on a balance of R5,000 at a rate of 8.40%. You can open an account with R20, earning 7.9% on balances under R1,000, and the rate increases the more you save, topping out at 10.40% for balances over R25,000.
Find a Credit Card that Pays You
Justmoney.co.za says: Some credit cards actually pay you credit interest if you keep a positive balance, which could be good for the canny saver because paying with your credit card can be cheaper than racking up bank charges - except if you draw cash on your card. But remember if you spend all your positive balance you will have to pay debit interest of around 24% or higher, so that's R1,200 a year on a R5,000 balance.
• The Virgin Money credit card pays 9.5% credit interest on all positive balances, so you could earn R475 a year if you have an average in-credit balance of R5,000 - and there are no fees for having the card or on most transactions
• The Blue Bean Premium credit card pays a credit interest rate of 8.5% - which means R850 a year on a R10,000 balance - but you need to earn at least R20,000 a month and there is a card fee of R168 per year.
• Most Nedbank Credit Cards pay 8% on positive balances, so you could earn R400 per year on a R5,000 in-credit balance.
Put It In Your Mortgage
Justmoney.co.za says: Paying even a small amount into your mortgage is a great investment, saving you money and potentially reducing the length of your bond. And, when hopefully property prices rise again, you'll get a better return than the average savings and investment account.
Potential returns:Paying off R10,000 of a 20 year R1 million mortgage at a rate of 14.5% over 20 years will save you R128 a month, a total of R30,720 over 20 years, bringing your month payments down to R12,672.
But if you kept on paying the higher, pre-reduction repayment figure of R12,800 a month, you could shave even more money off the total amount you pay, as well as reducing the length of your mortgage, depending on future changes in interest rate.