My single friend of 29 years is a first-time homeowner and has been paying off her bond diligently for nearly 21 months, unfortunately for her, her now disposable income is a lot less than what she was used to (BUMMER!!).
Yes, owning a home is sometimes a shock on the bank account for newbies that did not anticipate the extra costs like rates and taxes, levies etc. The good news though is that her property value is going up and the loan amount is going down and after some time her suffering (of not being able to go for everyday sun downers at fancy cocktail bars!!) will be over…
She did however notice something to make her smile… with the bank interest rates coming down numerous times this year, she all of a sudden had more money than usual left over in her account each month. Although now, of course, all the fancy cocktail bars are closed and she has to look for a spouse online instead.
With all this free unexpected cash and a small bonus from her employer, she was toying with the unimaginable…. To save money in a fixed term deposit for the first time ever. How ironic that the very same thing that put some money in her pocket (lower interest rates) will now give her money AGAIN through saving money in the bank. Just think about it....earning interest on money saved by not paying interest... blows my mind every time....
The bad news for EARNING interest though is that the interest rates have come down more than 3% this year, effectively causing you to earn LESS money from your savings - and also your pension funds.
But she is a brave cookie and she faced the challenge head on… she went to consult with Google.
Let’s have a look what she found for each bank and how you can make your money work best for you. She looked at investing for 12 months in a fixed deposit account. She looked at Capitec, FNB, ABSA, African Bank and Standard Bank to compare rates.
There you have it in a nutshell! From the data on the bank websites it looks like the best bank to save with right now is African bank. BUT have you considered what inflation is and is the value of your money becoming less even though you are earning interest? What do I mean by that?
When you ordered your groceries off the checkers app or Takealot or whatever platform you use... go check what you paid for your basket of food in July 2019 and what you are paying now. That is the direct effect of your money being worth less. IF you are now paying 7% more than last year for the same items, it means that your money didn't actually grow (even though the actual Rand value is higher) as you will now spend more for the same items than what you did last year. So now the bank rates do not look so good anymore. Your money is actually dying, becoming worth less every month....
But investing for something is better than not investing at all!
And lastly for the R1,000,000 question…. What did my friend do with her savings?? It is still in her account waiting for her to make up her mind!! Grrrr…… I think I need to take over a bottle of wine and explain to her how she can invest with M5 Property Addicts to earn 15% per year! Some people I will never understand….:-)
When embarking on the investing journey, just a word of caution: Beware of potholes. A financial adviser gives these valuable tips:
Happy shopping around, and if you can, pay off that clothing account first!
Disclaimer: The writer is not a financial adviser.
All interest rates are subject to change.
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