Investing and saving your money allows you to generate interest, save for emergencies and goals and ultimately build long-lasting wealth.

With South Africa’s economy struggling to stay above junk status and consumers struggling to repay their debts, it’s time that we make some changes to the way we view and handle our money.

In this article we will briefly look at some of the country’s top savings accounts as well as delve into the reasons you should put money away, regardless of how much you’re earning.

Educating yourself on savings & investments

Investing is perhaps one of the most intimidating financial moves and requires a great deal of effort, self-study, commitment and willingness to take risks. If you do not put in the hours to learn about investing you will not be able to make the most of your investments and perhaps you'll lose out on returns you could’ve made.

When it comes to savings, putting your money into a savings account at a bank may not generate dazzling returns but, it sure beats leaving your money in an non-interest bearing transactional account and, it can help motivate you to continue saving and working towards your financial goals.

Why should I save money?

There are an endless number of reasons to save money and these range from something as simple as savings for a holiday to something more complex like saving for a 20% deposit on the purchase of your first home.

Here are some of the most common reasons you should save money:

  • To fund your education or the education of your children
  • To put down a deposit and secure a home loan
  • To have an emergency fund that will provide for you when unexpected things happen
  • Reduce the stress you feel by knowing that you have money tucked away for when you need it most
  • You can avoid having to take on debt to make large purchases or fund weddings and holidays among other things
  • You can set and achieve your financial goals through smart saving
  • You can earn interest and help your money stay ahead of inflation
  • You can save for your retirement and ensure you have more than enough to retire comfortably
  • You can purchase a car without having to take on an expensive car loan

Compound interest for long term savings

We’ve all heard about the wonders of compound interest but many South Africans are still keeping their money in transactional and savings accounts that are earning them little to no interest.

How does compound interest work?

Compound interest allows you to deposit a certain amount of money, earn interest on that money after, say one month and then, earn further interest on your capital investment as well as on the interest gained during the previous month.

Without adding any further savings into a compound interest account, you will increase your savings substantially!

Best savings accounts in South Africa

There are a wide range of savings accounts available and the interest rates earned will vary depending on the bank as well as whether you choose a fixed term savings account or an open savings account.

Fixed term savings accounts require that you invest your money for a set period of time, for example a 12 month period, while open savings accounts allow you to access your savings when and as required. If you wish to access the money in your fixed term savings account you will need to provide notice of this intention.

Putting your money into a savings account may not yield impressive returns but it’s a simple way to save and invest and can offer you quick and easy access to your money when you need it. Opening a fixed or open savings account will always be better than keeping your money in a regular cheque or transactional account.

Where to find the best savings account for you

Interest rates and savings products change often and it is important to check with all the major banks as well as the smaller banks before choosing a specific savings account. Lesser known providers like Tymebank, African Bank and Finbond, just to name a few, offer some of the best interest rates on savings in the country. Below we will take a look at 3 of the current leading savings accounts in the country.

Opening a savings account with Tymebank

In order to open a savings account with Tymebank you must first open an everyday account. You can then open what is referred to a GoalSave which is tool and that allows you to earn up to 10% interest, which is currently one of the highest in the country. The GoalSave tool allows you to open up to 10 different savings accounts and the interest earned depends on the length of time that you keep the money in the account.

Summary of interest earned with Tymebank:

  • 1 to 30 days = 6%
  • 31 to 90 days = 7%
  • 91 or more days = 9%
  • If you provide 10 days notice after 90 days: 10%

Findbond Mutual Bank’s saving account

Findbond offer a savings account with an interest rate of up to 9.65% per annum but requires a minimum deposit of R100,000 and is a fixed term investment which will require a 7 day or 32 day notice period should you wish to access the funds. This is a fantastic option for anyone looking for a savings account for a medium or long-term savings time frame.

Summary of interest earned with Findbond:

  • 6 to 11 months = 7.50%
  • 12 to 24 months = 8.25%
  • 25 to 36 months = 8.50%
  • 37 to 48 months = 8.75%
  • 49 – 59 months = 9.15%
  • 60 to 66 months = 9.35%
  • 67 to 72 months = 9.65%

African Bank’s Tax free savings account

African Bank may not beat Tymebank’s current interest rate but their tax free savings account which can earn you up to 8.67% interest is still a great choice.

You can open a savings account with as little as R50 and can invest up to R500,000. Although the interest rate will not drop, if the interest rate improves, you will benefit from this increase.

To open a savings account with African Bank you simply need you South African ID document or passport and proof of address.

Extra tips on making the most of your savings:

  • Always compare savings accounts and options to find the most suitable option for you
  • Try to save for the long run, term deposits earn more interest than open or no notice savings account
  • Develop the discipline to not reach into your savings regardless of how badly you may want to purchase something
  • Make use of your bond to earn interest on your salary by depositing all the money left in your account after your debit orders run
  • Always make savings a part of your monthly debit orders and bills and try set up an automatic transfer of money from your transactional account to your savings accounts every month
  • If you do not have a separate emergency fund, use your bond account as an emergency fund or make sure you choose an open savings account option for easy access to cash
  • Start saving for retirement early and take advantage of retirement and pension tax deductions
  • Ensure you do not take on any short-term debts or debts that are unnecessary