Putting some spring into your financial plans

This September why not take a fresh look at your financial wellness and add a little spring into your planning. “Investing is not just for the rich. Nor do you need large amounts to start investing. What you do need is to understand some basic concepts and principles relating to investing,” says Mellony Ramalho, African Bank’s Group Executive: Sales, Branch Network.

The concerning reality, according to the latest research by Momentum and Unisa, shows that 73,5% of SA households are in fact financially unwell and generally don’t budget, conduct very little debt and financial planning, and generally have very low financial literacy and capability levels.

Ramalho agrees with the report findings that placing households on a path of financial wellness requires high-quality education, an enhancement of financial literacy and financial capabilities, and an improvement in the general understanding of financial planning and other financial services.

She says for those families willing to make a change, the key to investing is finding the right product that meets your objectives – how much you want to invest, what kind of returns you want to see and the time period of your investment.

She says parents of small children, for example, could consider a Tax-Free investment account. The aim of this type of investing is to save and grow the investment for educational purposes. “Adults that open this investment account for themselves often use it as an additional retirement savings tool.” The great thing about this kind of account is that you are also now able to transfer your tax-free investments from one institution to another.  This was announced by the National Treasury and took effect on 1 March 2018.

Notice accounts, as another example, provide a great method for saving on a shorter- term basis, such as for holidays, unexpected expenses or to keep funds aside for Christmas or when children go back to school. Fixed deposit accounts provide a highly competitive interest rate for customers who invest a lump sum. “Some customers use the interest payment as income and choose to have the interest paid out according to their needs whether it be monthly, semi-annually or annually,” she explains.

If you had to put this into rand value, investing a lump sum of R200 000 for example, at an interest rate of 10.5% per annum (nominal annual compounded monthly, NACM), provides a guaranteed return of R137 320.60 over 60 months.

“The interest rate earned is based on the selected interest pay out frequency. If you choose a monthly interest pay out you will earn 10.5% interest per annum. If you choose to leave your interest earned in the investment account until expiry, you will earn a higher interest rate – this is called compound interest. You earn compound interest (interest on interest) throughout the investment term if you choose to leave the interest earned in the investment account. That way you will earn maximum growth on your investment,” explains Ramalho.


Here are a few tips Ramalho believes are important to keep top of mind:

  • Get good advice – Remember that while this may be a first-time experience for you, there are many people out there who have been investing for years. Don’t be afraid to draw on their knowledge and expertise before making a decision. Do your research, ask questions and compare various products.
  • Understand risk – Different products have different risk profiles. Savings are low risk funds that must be liquid (available) when you need them. Investments involve greater risk but yield much greater returns when left alone long enough to ride out the turbulence of the stock market. The return on an investment is linked to the risk involved – the higher the risk, the higher the potential return (e.g. stock market) while the lower the risk, the lower the potential return.
  • Accessing your funds – Each product will have its own rules when it comes to accessing your funds. A notice deposit account, for example, is a short-term investment product where you can withdraw your investment giving a notice period of seven, 32 or 90 days. Then there’s a fixed deposit account where the length of the investment is set at either three, six, 12, 24 or 60 months.
  • How deposits work – Once again there are different options depending on the investment product when it comes to depositing amounts. Some products allow several deposits into the investment account with an unlimited maximum investment amount. Other products only allow a single deposit and some have a cap on the maximum investment amount.
  • Look for the best interest rates available – Do your homework. Interest rates are key to the growth of your funds. Don’t be bamboozled by advertising and complex figures. Ask product providers for practical examples of how interest rates work on different products.


“Most importantly, stay the course. No matter what option you choose, the most important thing is to stay the course. You want your money to grow #GrowForIt so make sure you stick to your commitment. Ideally investing should be seen as a long-term commitment so you have the greatest chance of getting the best returns,” concludes Ramalho.


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