Over 16 million South Africans have a savings account, but the majority of these funds are held in low-interest accounts. Opening a savings account is a smart move, but it’s important to keep in mind that for saving to be worthwhile, you need to earn an above-inflation return.
Switching to higher interest accounts will enable better savings returns. The savings market can be complex, so it’s important to educate yourself about the best options available.
Interest rates for savings accounts are designed to keep up with inflation, which means that the returns aren’t all that impressive.
Compound interest means that your savings grow faster. In this way, you earn interest on interest. This results in your savings being safe from fluctuations.
High interest savings accounts are also available. This is also one of the best places to store money that you don’t want to spend on monthly expenses, but that you may wish to use in the near future. It can also be a great place to keep and grow your emergency fund. You can store some money away that will be enough to cover at least three to six months’ worth of expenses.
With a tax-free account R33 000 a year can be saved. Entire savings are capped at R500 000.
A fixed deposit is an amount of money you save that cannot be accessed until maturity and no additional funds may be added to this investment. Various institutions have different options for fixed deposit types.
Interest can be capitalised or withdrawn on demand, however, withdrawal of the deposit before maturity is not allowed.
Interest rates for savings accounts must be compared, in order to get the best possible benefits.