What we can give up to save

GIVING UP SOMETHING NEED NOT MEAN DEPRIVATION BUT RATHER COST MANAGEMENT

Higher fuel and electricity prices – months after an increase in value-added tax – could see many South Africans having more month at the end of their money. But the increasing financial burden, and even debt, should not derail savings plans, especially during the National Savings Month.

“The reality is that every month should be National Savings Month. Intuitively, it is the right thing to do but it does require a degree of formality and discipline,” says Dave McCall, Nedbank’s executive for investments in retail and business banking.

As the financial pressures show little sign of abating, McCall advises asking ourselves what we can give up to save. Importantly, giving up something need not mean deprivation but rather cost management. Forgoing costly cellphone calls during peak hours in favour of making off-peak calls can lead to a significant reduction in cellphone costs.

Thanks to the power of compound interest, which is effectively earning interest on interest, a little in savings goes a long way. If you save R1 000 a year under your mattress, you’d be left with R10 000 after 10 years. If you save that R1 000 a year in an interest-bearing account of 10% per year, it would be worth almost R18 000 after 10 years.

If you’re saving for a particular goal, McCall advises defining the goal and the amount necessary to achieve the goal. Thereafter, it’s important to consider your timeline and the interest rate implications over that period.

Typically, short-term goals can be met with simple interest-bearing bank deposits, savings or money market accounts. To choose the right bank deposit, it is important to consider tenure as well as how quickly you can get access to funds, he says.

To meet your savings goals, Nedbank offers two competitive bank deposit products: a fixed and EasyAccess deposit. Should you have a lump sum of cash that you have no need to access for a period of time, consider a fixed deposit. Nedbank fully guarantees your capital and charges no monthly management fees.

The EasyAccess deposit offers the best of both worlds – the guaranteed returns of a fixed deposit and access to up to 50% of your money within 24 hours.

For medium- to long-term goals, an investment account or mix of money market, equity-linked accounts, bonds or investing directly on the stock exchange should prove useful

When it comes to investing, determining your propensity for risk as well as whether you’re prepared to risk your capital or returns is of utmost importance, says McCall.

Nowadays long-term investments such as Nedbank’s Green Savings Bonds allow you to save for your own future while contributing toward a greener future for South Africa. The Nedbank Green Savings Bond offers competitive interest rates, guaranteed returns and capital security at zero cost, with all capital raised earmarked for investment into renewable energy projects

Whatever your savings plan and circumstances, making your money work for you should be the ultimate goal.