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20 Jun 2012


Crucial information on money market investing for South Africans:

A good friend of mine emailed me today. She wanted advice on saving money for short and long term projects. An emergency fund kind of savings account. She is a home owner and drives, meaning she has to be prepared for bursting geysers and car problems amongst other emergencies. I gave her what I think is my version of the beginners guide to investing.

Money Market Investing
This is the guide I gave my sister who is still in the university. I do wish I started investing money while in college. It never happened but my baby sister started. already. Whilst our bigger plan involved money market investing, we looked at the best interest savings accounts first. Remember she is a student and therefore doesn't have the R5000 which is the lowest minimum money market account opening balance. I found Capitec Bank savings account to be the best tool to start saving. I know, this is a relatively new bank, it doesn't have many ATM machines, etc. Actually the fewer ATM machines should be the best news for a starter investor.

South African Money Market Comparison
If you have R5000 to start with you have only 2 banks to look at. Standard bank with up to 4% per annum in interest. It looks good except, it has banking subscription charges. We hate those, don't we. But great news, no monthly fees.

Another option for R5000 initial investment is my very favourite, Nedbank JustInvest account. I have first hand experience of this account. You earn up to 5.25% interest and the best news is that, its is a 24 hour notice account. That makes it almost liquid. You are unlikely to need your money in less than 24 hours, right? It also has no monthly charges, only the subscription. You don't get any Greenbacks as rewards when you use your account. I love this account.

For R10,000 you can get the FNB Money Market. I feel that this account is expensive. Apart from the fact that it has monthly charges, it also earns you only up to 3.9%. It also earns you their most popular ebucks rewards. I am not so fond of this account. And I like FNB when it comes to their flexibility, the ebucks and the PayPal. But I wouldn't choose this account.

The Nedbank Money Market account is opened with R20,000 and earns a mere 3.8% maximum. You get penalty monthly charge if you keep less than R20k. You earn greenbacks when you use your check account. I dont see a reason why someone would choose this money market investing account instead of their JustInvest account mentioned above.

ABSA wants R25,000 minimum opening balance. They generously give you 5% pa for that. This makes it the highest interest money market account. But Just Invest still wins if you have R100,000 or more to invest. But before you take that decision, lets rewind back to Capitec.

Capitec savings and savings plan accounts earn you 5% interest for any amount below R10,000. I mean even R500 will earn you some interest. This is the account my baby sis uses to kick start her savings. This is the way I will teach my kids to also start investing money while in college or high school. I don't see why not. That concludes my SA beginners guide to investing through banks. Our banks do have higher interest rates compared to other countries.

We have heard about the concept of "paying yourself first" and its high time we use it. I learnt to transfer money from my cheque account to my emergency fund before I get carried away with my randomn expenditure. The bonus that I get from that is the interest I earn at the end of the month. I cant see a better way to work with your money.

If you want the stock route you may think about investing your money online through the banks or directly with the JSE. Banks like FNB allow you to open an account to do share trading at a small fee.

Keep moving forward. Start today, NO, start now.


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