According to a banking report done last year, there was almost R300bn of cash sitting idle in the bank accounts of South African consumers. If this money was invested in a cash fund earning 4% annual interest (which is about what you can get with Franc at the moment), this would mean that South Africans would have a whopping R12bn a year extra to help them get by!
Eish, but why?
So, why don't people do this? Do we think our money will be locked up and we may need to pay penalties to access it if we need it in an emergency? Do we choose to do nothing because all the options out there are too complicated? Do we not have enough to satisfy the minimum investment required by a financial provider?
Well, the above are all possible answers. Some products like fixed deposits do tie up your money and if you want to access it, you may forfeit some of your return. There are lots of products that are difficult to understand and have fine print that isn't very customer friendly. Some high interest bearing products give you a better return the higher your investment amount - so the rich get richer! Don't get us started on bank savings accounts which give you a very low return (many under 1% a year) and then still want to charge you a monthly fee which will probably be much higher than the interest earned! So you actually lose money by keeping it there! Not to mention the impact of inflation so you are actually losing twice even though you are trying to be smart and save money.
Educate yourself (high 5 for reading this blog!)
If you fell into the categories above then at least you have started to look at ways of getting your money to work for you, even if you have ended up doing nothing. In SA, financial education is generally a big problem. In a series of polls done by Capitec last year, 20% of those polled didn't know what a savings plan was. 40% of people spoken to didn't have a savings plan and 59% of those with a savings plan didn't know what interest they were earning. Make sure you know what you are getting from your bank/investment provider!
Put your money on the treadmill
If you have money sitting in a bank account, whether it is your emergency fund which is crucial (and which you can read up on here) or whether you are part of the gig economy and need to stash what you are going to hand over to SARS (as much as you may not want to!) somewhere safe - make sure that money isn't lazy, get it to work for you.
A friendly reminder that if you invest in Franc's cash fund, there are no minimums, the fees of 1% per year are taken off the interest earned so you always make money and you always have access to your money without any penalties!