"Growth" is a word that has seeped into all facets of popular culture of late. It has been made fashionable by Oprah-esque talkshow hosts, influencers and anyone with two cents to spare on social media platforms. When they say growth, they mean improvement — that with patience, small beginnings can turn into achievement and success. Cue the head-nodding from the audience. We all believe that, with a little investment, we can grow into better versions of ourselves.
The same holds true for your money.
Savings and Investments are an integral part of your financial life. Without it, you are living from salary slip to salary slip, completely unprepared for emergencies and relying on debt to cover the shortfall. Putting a little money away each month isn’t nearly as appealing as spending the cash on designer wear or a raucous night out, but the rewards far exceed the momentary pleasures afforded through instant gratification.
That little bit of money you save or invest each month will eventually grow into the deposit for a new car, school fees for your children, or the money you might need for an emergency medical procedure. It could even be the money that adds an extra layer of comfort to your retirement. Just 6% of South Africans will be able to retire comfortably. No one wants to waste their golden years lamenting the decisions of their younger selves.
There are numerous savings and investment options available, each with special features suited to your individual needs. Today, we will discuss two of those options: the savings account and the Tax-Free Investment account.
The savings account
This is a bank account that allows you to save money, while earning interest at a slightly higher rate than you would in your main account. Though the money is kept separate — curbing the temptation to spend it — it is also readily available whenever you may need it. The savings account, or savings pocket, is especially useful as an emergency fund. It acts as a financial buffer when unexpected expenses threaten to undo your budget, such as when you need to replace your car tyres, or your geyser packs up.
You can also channel the potential of a savings account into goals or experiences that you have planned in the future. If, for instance, you would like to travel with friends to a dream holiday destination in a few months’ time, you could pool your money in a savings account and use a favourable interest rate to help the money grow. African Bank’s MyWORLD account allows you and your friends to jointly manage an account for events such as these, and offers SA's best savings rate on any positive balance. Click here to find out more.
The Tax-Free Investment account
The benefits are in the name — Tax-Free. That means that the interest you accumulate in this type of account will not be taxed. The Tax-Free Investment account works best as a long-term option, which allows you to take advantage of compound interest.
Compound interest is where the interest you earn on your investment creates an even bigger savings total, which then earns even more interest. The longer you leave the money in the account, the greater your investment will be.
That makes it perfect for goals you have set for yourself that can only be realised in a few years' time, like buying a house, or paying for your child’s school fees at a top institution. With a Tax-Free account you can start small, with investments from as little as R50, while benefitting from a higher interest rate, as compared to a savings account.
There are, however, some rules attached to the Tax-Free account. You can only invest up to R36 000 a year, and up to R500 000 in your lifetime. Your access to the money also comes with conditions. You can only withdraw your money every 12 months, or during the anniversary month of your investment. Find out more here.
Know your options
Knowledge is a valuable financial tool. Knowing your options, and how best to utilise them will give you an edge when it comes to realising your financial goals. The idea is to find the best conditions for your money to grow into something substantial. African Bank offers the best savings and interest rates, so be sure to visit www.africanbank.co.za and find out how you can stimulate your very own growth.