Saving - the right way
How to choose a savings vehicle that works for you
There are many ways to save money for when and if you need it - it all depends on who you are and what your needs are.
Having a savings plan is very much like setting a goal for the future - you work towards something that will benefit you at a later stage. Here are some examples of how you can save money for a time when you'll need it:
Savings Account:
A savings account is the most common way to save and can be opened at any bank. You can deposit an unlimited amount of money, whenever you choose and the money you deposit is also available to you at any time. The negative aspects of a savings account are that you don't really gather much interest on savings, and bank charges apply - so that every time you withdraw money, you will pay fees.
Fixed Deposit Accounts:
A fixed deposit account is an investment account where money is deposited for a fixed period and the interest does not fluctuate. The benefit of this type of savings plan is that you can choose how long you want to invest for. The interest rate is fixed for the full term of your investment - usually at a better rate than prime. You aren't allowed to withdraw funds from your account during the investment term, making this a good way to save.
Retirement Annuities (RAs):
A retirement annuity is a long-term investment that enjoys special tax benefits. RAs are a good savings vehicle as they're tax deductible within certain limits. Plus, the payout can be taken as a lump sum and the balance as a monthly annuity for life, or taken entirely as an annuity for life. It's only available to you when you reach a certain age, (usually 55) so you won't be able to spend it.
Endowments:
An endowment is a medium-to-long term investment fund into a portfolio of stocks, shares, bonds and property that are managed by specialist fund managers. The benefit of an endowment policy is that your payout is tax-free. There is a minimum investment amount per month (usually starting at R150) and a minimum and maximum investment period (usually 5 years minimum and 25 years maximum).
Unit Trusts:
A unit trust is share of a specific fund that invests in stocks, shares, bonds and property, and which is managed by a specialist fund manager. A benefit of unit trusts is that all income earned is tax-free. Plus, unit trusts can be sold at any time at the prevailing rate, which makes them a flexible option. There are also a variety of funds to choose from, usually with a minimum investment amount.
There are many ways to save money for when and if you need it - it all depends on who you are and what your needs are.
Having a savings plan is very much like setting a goal for the future - you work towards something that will benefit you at a later stage. Here are some examples of how you can save money for a time when you'll need it:
Savings Account:
A savings account is the most common way to save and can be opened at any bank. You can deposit an unlimited amount of money, whenever you choose and the money you deposit is also available to you at any time. The negative aspects of a savings account are that you don't really gather much interest on savings, and bank charges apply - so that every time you withdraw money, you will pay fees.
Fixed Deposit Accounts:
A fixed deposit account is an investment account where money is deposited for a fixed period and the interest does not fluctuate. The benefit of this type of savings plan is that you can choose how long you want to invest for. The interest rate is fixed for the full term of your investment - usually at a better rate than prime. You aren't allowed to withdraw funds from your account during the investment term, making this a good way to save.
Retirement Annuities (RAs):
A retirement annuity is a long-term investment that enjoys special tax benefits. RAs are a good savings vehicle as they're tax deductible within certain limits. Plus, the payout can be taken as a lump sum and the balance as a monthly annuity for life, or taken entirely as an annuity for life. It's only available to you when you reach a certain age, (usually 55) so you won't be able to spend it.
Endowments:
An endowment is a medium-to-long term investment fund into a portfolio of stocks, shares, bonds and property that are managed by specialist fund managers. The benefit of an endowment policy is that your payout is tax-free. There is a minimum investment amount per month (usually starting at R150) and a minimum and maximum investment period (usually 5 years minimum and 25 years maximum).
Unit Trusts:
A unit trust is share of a specific fund that invests in stocks, shares, bonds and property, and which is managed by a specialist fund manager. A benefit of unit trusts is that all income earned is tax-free. Plus, unit trusts can be sold at any time at the prevailing rate, which makes them a flexible option. There are also a variety of funds to choose from, usually with a minimum investment amount.
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