Savings

Saving is something we hear a lot about. We all know we should be saving for retirement and for emergencies but often getting started is difficult. 

To get started saving here are a few golden steps to follow:

  1. Set a savings goal: having a goal to work towards makes it easier to stay on track and to monitor your progress.
  2. Save regularly: commit to putting a little money away each month, ideally at the start of the month.
  3. Save what you can: every little bit helps so save whatever you can.
  4. Save in a separate account: always put your savings into a separate bank account. That way you can’t spend it as easily.

When you start saving you will need to put money away for emergencies, plus you will need to think about your goals over the short-term, medium-term and long-term. Maybe you want to go away on holiday over the festive season, in a few years you might want to send your child to university and when you retire you want to live comfortably.

These are all very different savings goals that you want to achieve over different periods of time. To get started work out how much each of your goals will cost, then calculate how much you can save each month and then calculate over what period of time you will need to save to make it happen. You can use this simple template.

If you are prepared to save this amount of money for this number of months, open a savings account. Remember to save regularly to reach your goal more easily.

Short-term goal Medium-term goal Long-term goal
Item      
Cost of item?      
How much you can save per month?      
How many months/years you will need to save for?
(Divide the total price by the amount you can afford to save each month)
     
By when?
(If you have to save enough money by a certain time, then write the date here. Use this to give yourself a date by when you want to have the money)
     

 

See a financial adviser

Some of these goals are difficult to calculate and the best way to work out how to make these goals happen is by seeing an experienced and certified financial adviser, they are trained and can help you determine which financial products are appropriate for your goals and for certain times in our lives. For example someone who has just started their first job will need a different retirement product to a person in their 40s with a family. Different financial products are suited to different life stages. Asking for professional financial advice is the first step on the financial planning journey.

To learn more about financial advice, how the process works and what you can expect, please click here.

financial advisor wagewise

See a financial adviser

Some of these goals are difficult to calculate and the best way to work out how to make these goals happen is by seeing an experienced and certified financial adviser, they are trained and can help you determine which financial products are appropriate for your goals and for certain times in our lives. For example someone who has just started their first job will need a different retirement product to a person in their 40s with a family. Different financial products are suited to different life stages. Asking for professional financial advice is the first step on the financial planning journey.

To learn more about financial advice, how the process works and what you can expect, please click here.

Things to remember when investing and saving

  1. If an investment sounds too good to be true, then it probably is. Be very cautious if you get promises of very high returns and remember that high returns often involve high risks.
  2. Do not invest in a product if you do not understand it. Ask questions to make sure you understand where and how you are investing your money.
  3. If your circumstances change you may need to reconsider your investments. Consult a certified financial adviser to help you make choices that will meet your needs.
investing and saving wagewise

Things to remember when investing and saving

  1. If an investment sounds too good to be true, then it probably is. Be very cautious if you get promises of very high returns and remember that high returns often involve high risks.
  2. Do not invest in a product if you do not understand it. Ask questions to make sure you understand where and how you are investing your money.
  3. If your circumstances change you may need to reconsider your investments. Consult a certified financial adviser to help you make choices that will meet your needs.

Watch your money grow

One of the benefits of saving your money in a separate savings account or investment product is that your money earns interest. This means that it grows a little bit every year and helps you build your wealth.

Some investments have higher risks and give higher interest. In addition, different institutions often offer different types of products, depending on the needs of the client.

watch your money grow wagewise

Watch your money grow

One of the benefits of saving your money in a separate savings account or investment product is that your money earns interest. This means that it grows a little bit every year and helps you build your wealth.

Some investments have higher risks and give higher interest. In addition, different institutions often offer different types of products, depending on the needs of the client.

Savings options

Here is a summary of the kinds of savings and investment accounts available.

Short-term saving options

Savings accounts
This is mainly for saving, but you can also make other transactions. You need only a small amount of money to open a savings account and maintain a minimum balance. Depending on how much money is in the account, interest may be paid and deposited into the savings account.

Notice deposit (fixed deposits and call) accounts
These are accounts that if you want to withdraw money you first need to inform (give notice) to the bank that you want to withdraw money. The notice period can vary from 7 to 30 days.

Money market accounts
Money market investments are generally investments for a period of less than 12 months. The most common money market investments are bank accounts or unit trust funds.

Stokvel
A group of people who have decided to pool their savings on a regular basis. It might be formal or informal.

Medium-term investment options

Unit trusts
Very simply, a unit trust is a group of individual investors who pool their money together for the purpose of investment. The money is placed with a unit trust manager whose full-time responsibility is the management of these assets. Unit trusts are normally invested in a variety of investments such as shares listed on a stock exchange or bonds. Investors share in the fund’s gains, losses, income and expenses on a proportional basis.

Endowment policy
An endowment policy is an investment where you save regularly and you receive a single pay-out after an agreed time, often a number of years.

Tax-Free Savings
Investments where you do not get taxed on the growth of your investment. You can only invest R36 000 a year in a tax-free savings account, and once the amounts you have invested (without taking growth into account) add up to R500 000, you cannot contribute anymore. It does not matter how much growth you earn on your annual contributions, as long as the amounts you put in does not add up to more than the annual or the lifetime limit.

RSA retail bonds
Retail Savings Bonds are a savings vehicle available to all individuals who are citizens or permanent residents of the Republic of South Africa and who are in possession of a valid South African identity number, and who operate bank accounts with financial institutions in the Republic. A minimum of R1 000 (one thousand rand) is required to invest in a retail bond.

Long-term investment options

Pension/provident funds and Retirement Annuities (RA)
A pension or provident fund is an investment that provides a pension when a person retires. A Retirement Annuity is an investment where a person saves regularly to give them an income when they retire.

#GetWageWise tip: consult a certified financial planner to get professional advice on the best investment option for you.

Savings and investment scams

Everyday people put their hard-earned cash into get-rich-quick schemes that are sold as “can’t lose” propositions. The bad news is that people end up losing their life savings by placing their money in Ponzi and Pyramid Schemes.

What is a Ponzi Scheme?

Named after Charles Ponzi who first made these fraud schemes infamous, they are operated by tricksters and sometimes seemingly legitimate businesses that will invite you to invest in a scheme or business.

The operator promises you unrealistically large returns on your investment in a short period of time. These schemes depend on enticing a steady flow of investors, whose money goes to pay off promises made to earlier investors. Any such scheme will inevitably collapse, as it is impossible to find enough new investors to keep the scheme going.

What is a Pyramid Scheme?

A Pyramid scheme is one in which you are required to be an active participant. After an initial entry payment has been made, you would be required to recruit other members before earning a return on the original ‘investment’. The more recruits, the greater the return!

ponzi scheme wagewise

Savings and investment scams

Everyday people put their hard-earned cash into get-rich-quick schemes that are sold as “can’t lose” propositions. The bad news is that people end up losing their life savings by placing their money in Ponzi and Pyramid Schemes.

What is a Ponzi Scheme?

Named after Charles Ponzi who first made these fraud schemes infamous, they are operated by tricksters and sometimes seemingly legitimate businesses that will invite you to invest in a scheme or business.

The operator promises you unrealistically large returns on your investment in a short period of time. These schemes depend on enticing a steady flow of investors, whose money goes to pay off promises made to earlier investors. Any such scheme will inevitably collapse, as it is impossible to find enough new investors to keep the scheme going.

What is a Pyramid Scheme?

A Pyramid scheme is one in which you are required to be an active participant. After an initial entry payment has been made, you would be required to recruit other members before earning a return on the original ‘investment’. The more recruits, the greater the return!

What is the difference between a Ponzi and Pyramid scheme?

The major difference between the schemes is that in Ponzi schemes the investor takes no active part, whereas in a pyramid scheme, active involvement is a requirement.

Tips for avoiding Ponzi and Pyramid schemes:

  1. When choosing a money making opportunity, do your homework thoroughly.
  2. Get advice from registered financial advisers.
  3. Take your time, you didn’t save it overnight.
  4. Be particularly cautious of ‘opportunities’ that promise to make you wealthy in a very short period.
  5. Beware of a ‘secret formula’ that will only be shared with select investors.

Why use registered financial institutions?

Accredited financial institutions are regulated and supervised, by either the South African Reserve Bank, National Consumer Commission or the Financial Sector Conduct Authority.

There are strict rules and controls that govern investments with these institutions whereas, unregulated and unsupervised persons and groups don’t follow these rules and your money is at great risk with them. An investment for the future must be a decision for long-term commitment. Be confident that your money is safe.

How to protect your money?

Make sure that you only give your money to a company or person that is registered as an accredited financial services provider and a deposit taking institution in terms of the Banks Act. Take the time to check with a respected and registered adviser.

How do you know if a financial institution / company is legitimate?

For more information visit www.resbank.co.za or to find out if a business is accredited contact the Financial Sector Conduct Authority Fraud and whistleblowing Hotline: 0800 313 626.

registered financial advisors wagewise

Why use registered financial institutions?

Accredited financial institutions are regulated and supervised, by either the South African Reserve Bank, National Consumer Commission or the Financial Sector Conduct Authority.

There are strict rules and controls that govern investments with these institutions whereas, unregulated and unsupervised persons and groups don’t follow these rules and your money is at great risk with them. An investment for the future must be a decision for long-term commitment. Be confident that your money is safe.

How to protect your money?

Make sure that you only give your money to a company or person that is registered as an accredited financial services provider and a deposit taking institution in terms of the Banks Act. Take the time to check with a respected and registered adviser.

How do you know if a financial institution / company is legitimate?

For more information visit www.resbank.co.za or to find out if a business is accredited contact the Financial Sector Conduct Authority Fraud and whistleblowing Hotline: 0800 313 626.

#GetWageWise tip: if it sounds too good to be true it probably is. Do your homework thoroughly and be cautious of opportunities that promise to make you wealthy quickly.

Frequently asked questions

Which is a better option of the two: short-term savings or a notice deposit account?
This will depend on your personal circumstances. We recommend that you speak to a certified financial planner or a consultant at your bank.
Can I invest a lump sum but get paid out some interest on a regular basis?
There are investment products that allow you to do this. You are advised to speak to a certified financial planner and to seek advice on the financial products that are best for you.
Saver Waya Waya WageWise is a financial literacy initiative of the ASISA Foundation. The WageWise website was largely funded by the Sanlam Foundation.