Stretch your savings

Posted on 2015-08-14

 

You never know when that rainy day will arrive when you’ll need to replace the geyser, maybe you’ve always wanted to go to Venice, or maybe you want to be able to send your children to university. Whatever the reason having a nest egg (no matter how big) is not just a nice to have but a necessity. Relook your budget to see if there aren’t any spending habits you can maybe change or cut down on to increase your savings, or compete an insurance quote and see if you can save on your monthly premiums.

 

It doesn’t matter if you’re putting away R32, R320 or R32 000, as you’re putting money away. Having money to put away is one thing, but where should invest it? Here are a couple ideas to help you decide on how to invest your money.

 

Cash

This might look like the easiest solution, just go into the bank, and ask for a savings account and wait for the bank to pay you interest. However, it’s very important to do your research first to find the product that suits your needs perfectly – what is the interest rate, what are the tax involved and what type of access do you have to your money. One of the main benefits of cash investment is that you can decide how much you are willing to put down and how often. Even though this can be seen as a ‘safer’ option as you’ll generally never get less money out than what you put in; it won’t grow as fast as other investments.

 

Bonds

This type of investments is called a debt investment in which you lend out money to someone (such as a corporate company) for a specified time at either a fixed or a variable interest rate. After the set time has passed, you’ll get your money back and you’ll be one of the first people to get your money back. You need to keep in mind, though that the interest you pay on bonds are a lot higher than on your regular income. Bonds are seen as a more stable and “safer” investment option than shares, but are riskier than cash investments.

 

Property

Many people choose to push their savings into industrial, retail or commercial property. It’s a great asset, depending on the area you buy in the value will increase. Also by renting it out you have an extra source of income, although you’ll have to deal with the lessees. This is however, a long-term investment and getting your money back is not quick or easy. Alexander Forbes found that historically property investments in South African have done well, “coming second only to South African shares”.

 

Shares

You get shares when you buy stock in a company, which means you share in the company’s profits. There are numerous ways of buying shares – through brokers or via banks. Keep a watchful eye on the JSE, as the stock market is in constant flux, and see your money grow (or decrease). Investing in shares is not everyone’s cup of tea and you need to pay very close attention to what you’re doing, but if you do it well, you’ll make good money. The warning that comes with investing in the stock market is: it’s a risky business.

 

Regardless of what you choose to invest in, you need to be certain that you know what it is that you want and what your ultimate goal is as well as what it is that you are investing in. If a deal sounds too good to be true, the rule of thumb says that it is too good to be true.

 

This article is for interest only and does not constitute financial advice.


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