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14
MONEY BASICS
with MARTIN HESSE
FIVE WAYS TO SAVE R1000 A MONTH LET’S say you’ve given your budget the once-over and found a spare R1000 that you can afford to put away month after month for at least five years. As with any investment, you want the best returns at as low a risk as possible, and preferably a savings or investment vehicle that is flexible enough to allow you to deposit extra or, in an emergency, withdraw your money at short notice. You may be immediately attracted to the obvious safe banking options, such as a debit order from your current account
into a separate savings or notice account. But these generally offer very low rates of return. Looking further afield, you should find ways to earn a better return without necessarily taking on more risk. At the very least, you want to beat inflation, which eats into your savings. Currently, inflation is running at about 5%, so if your returns are below that, you are actually losing money year by year. 1. REDUCE DEBT This is the first place you can score: what you pay in interest on debt
is normally a lot higher than what you receive in interest on savings. First eradicate any debt on your credit card account and your retail accounts, because they usually charge the highest interest Once short-term debt is taken care of, you can channel R1000 a month into your mortgage bond. By putting more than the required minimum into your home loan account, you are, in effect, saving at the rate of interest of the loan, without paying tax on the interest saved, which is almost certainly more than you’d be guaranteed
