Money mat­ters

Finweek English Edition - - COVER STORY SAVINGS TIPS -

1. Un­der­stand com­pound in­ter­est.

As Al­bert Ein­stein once said: “Com­pound in­ter­est is the eighth won­der of the world. He who un­der­stands it, earns it... he who doesn’t, pays it.”

Com­pound in­ter­est takes into ac­count not only the orig­i­nal loan (or sav­ings) amount, but also ac­cu­mu­lated in­ter­est of pre­vi­ous pe­ri­ods. (See ta­ble from In­vesto­pe­dia be­low.)

This shows how much money you can save by pay­ing off loans quicker, and how much you can earn by start­ing to save as soon as pos­si­ble.

2.

Di­rect any ex­cess cash into your bond or high-in­ter­est debt to pay it off quicker and re­duce the in­ter­est bill.

3.

Im­prove your credit score by pay­ing bills on time, pay­ing more than the min­i­mum re­quired amount, and re­duc­ing your over­all debt lev­els.

A bet­ter credit score will al­low you to ben­e­fit from lower in­ter­est rates. Tran­sUnion (www.tran­sunion.co.za) and other credit bu­reaus al­low you to check your credit re­port for free once a year.

4. Switch bank ac­counts to take ad­van­tage of perks and earn more in­ter­est.

Capitec of­fers the cheap­est bank ac­count in SA, ac­cord­ing to Sol­i­dar­ity’s Bank Charges Re­port for 2016, fol­lowed by Absa, FNB, Ned­bank and then Stan­dard Bank. Also take into ac­count the dif­fer­ent banks’ re­ward pro­grammes, and choose the best prod­uct to suit your needs.

5.

If you have been a re­li­able spen­der and have stuck to the re­pay­ment terms, ap­proach your bank and re­quest to rene­go­ti­ate rates on ex­ist­ing debt.

6.

Take ad­van­tage of the tax re­lief of­fered by fa­cil­i­ties such as tax-free sav­ings ac­counts and re­tire­ment fund con­tri­bu­tions. (Also see page 24.)

7.

Re-eval­u­ate your med­i­cal aid, fu­neral and in­sur­ance poli­cies and pre­mi­ums to en­sure that you are get­ting the best deal.

Hippo.co.za al­lows you to com­pare in­sur­ance and other per­sonal fi­nance prod­ucts from a range of South African brands.

8. Un­der­stand your med­i­cal cover.

Be aware that med­i­cal doc­tors do not charge the same rate as your med­i­cal aid pays, ad­vises Vi­rath Jug­gai, risk spe­cial­ist at Gra­didge Mahura In­vest­ments. “You would be well-ad­vised to take gap cover if you are on a med­i­cal aid that does not cover you at pri­vate rates. Get as much in­for­ma­tion as pos­si­ble on what your cover is,” he says. Con­sult with a well-in­formed ad­viser who can take you through a needs anal­y­sis and then help you choose the ap­pro­pri­ate plan.

9. En­sure that your life and dis­abil­ity cover meet your needs and those of your fam­ily.

Con­sult with a cer­ti­fied fi­nan­cial plan­ner who can do a de­tailed fi­nan­cial needs anal­y­sis that will show you the im­pact on your sav­ings and de­pen­dants if you pass away or suf­fer some event that ren­ders you un­able to earn an in­come. Once you are clear on the amount of cover needed, prod­uct choice be­comes im­por­tant, Jug­gai says.

10. Com­pare the cost and fea­tures of fi­nan­cial ser­vices prod­ucts be­fore com­mit­ting to one.

In­de­pen­dent web­site Fincheck al­lows users to com­pares 36 fi­nan­cial ser­vices prod­ucts cur­rently be­ing of­fered by

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