So you’ve made the decision to start saving. Now you have to consider a range of factors like how much to save, where to put your money, how to make sure it grows, and how much risk you are prepared to take.
We all know what happens to money left in your wallet or in your everyday bank account - it slowly disappears. Savings are best kept separate.
You will need to weigh up the advantages and disadvantages of different savings methods. For example, informal savings (money under your bed or in a simple stokvel) won’t earn interest and therefore can’t grow. There are no admin fees, which is a plus, but inflation will diminish its value every day. There’s also the risk that it can be stolen.
Formal savings methods such as depositing your money in a savings account with a registered financial institution such as Old Mutual or your bank is generally regarded as the wiser option.
What to consider when deciding how and where to save:
· Does the account offer good, stable returns? Remember that high returns also usually mean high risk – can you take that chance, or would you rather play it safe?
· Is the growth on your investment tax free?
· Will there be penalties if you withdraw money before the minimum investment term?
· What are the fees and costs associated with the savings account? How transparent are they?
· Do you want to contribute monthly, annually, or via a lump sum?
· Is there flexibility?
If you opt to save with the Old Mutual Invest Tax Free Plan, you have access to the Old Mutual Maximised Interest Fund, which offers you the best of both worlds with stable returns, but low costs and low risk. The current interest rate (which may fluctuate) is 8.81%.
Find out more about the Old Mutual Invest Tax Free Plan:
For more on the Old Mutual Maximised Interest Fund click here