INTEREST BEARING EMERGENCY FUND ACCOUNT

We are looking at one more good interest bearing emergency fund account. You may refer to Capitec's Global One account in the previous post. Again, I confirm that we are not paid by below mentioned service providers to provide this information.

Our Twitter handle @SafeInvestingSA asked a question:

"Do all banks have an interest bearing 24-hour or 1 day notice account that requires an initial investment amount of below R1000. Our #SavingCommunitySA needs that or similar for individuals."

interest bearing emergency fund account

Nedbank was one other bank that responded as follows:

"We have various Investment accounts with different offerings and minimum Investment amounts. Click on the link for more info on our account: xxx  :)".

We have looked at the Nedbank money market accounts and came up with the one that is most suited to the Emergency Fund. JustInvest account is our interest bearing emergency fund account of choice. One may start very slow as the minimum investment amount is only R500. This makes it ideal for the new savers.

This is the only one day or 24 hour notice account that we know of. I find the notice account with only one day notice fascinating. One day notice is long enough to ensure one sleeps on the decision to withdraw funds, whilst it is short enough to take care of an emergency.

One can use their debit account for monthly stop orders into this money market account. A great idea to ensure that one pays themselves first. This account earns interest from 4% at the time of publication of this article. The higher the balance the higher the interest earned. JustInvest also attracts no monthly fees. The interest on the balance at the tie of publication is:
Below R2,500 interest is at 4%; R2,500 – R24,999 at 5,25%; R25,000 – R49,999 at 5,75%; R50,000 – R99,999 at 6,2%; R100,000 – R249,999 at 6,3%; R250,000 – R499,999 at 6,35%; R500,000 ­– R999,999 at 6,4% and R1 million and above at 6,5%
For our emergency savings of R5,000 to R10,000 our interest bearing emergency fund account earns about 5%. This is not a bad interest on only one day notice.

I trust that you have started with the savings challenge. We have four steps and groups. 1. Debt pay-up, 2. Emergency Fund, 3. Other Savings Accounts, and 4. Investments. Please do keep moving. Start slow but do not stop. For daily motivation like us on Facebook, Twitter and/ or Instagram.

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INTEREST BEARING EMERGENCY FUND ACCOUNT

Our quest for good interest bearing emergency fund account lead us to the social media platforms. We are also analysing the Nedbank JustInvest account in the next post. Let me confirm that we are not paid by below mentioned service providers to provide the information below.

Our Twitter handle @SafeInvestingSA asked a question:

"Do all banks have an interest bearing 24-hour or 1 day notice account that requires an initial investment amount of below R1000. Our #SavingCommunitySA needs that or similar for individuals."

Only two of the four banks responded. Capitec responded

"We have a savings plan as an addition to our Global One savings account however there is no 1 day notice. You can get the funds immediately in emergencies".

Having checked the Global One account we agree that it is indeed a good interest bearing emergency fund account. At the point of writing this article Global One would get one a transaction account and four free savings plans. This works much better if you are the Capitec client as this is linked to the debit or credit card.

Most importantly for us is that this account earns from 5% interest per year on the balances. This is again at the time the article was first published. This is obviously adjusted with changes in the South African interest rates. The account earns 5% for R0 – R24,999 balance, 5.4% for R25 000 – R99 999 and 5.65 for R100 000 and above. Remember that we mostly save R5,000 to R10,000 in our interest bearing emergency fund account. 5% is not a bad interest on an account that has money readily available.

Lets get to the catch. One needs R25 minimum balance and a monthly administration fee of R5. But this is for the main account which you use for your daily banking activities. Hence the savings plan account itself is marketed as free. One may then link the four free savings plans to their main debit account.

I trust that you have started with the savings challenge. We have four steps and groups. 1. Debt pay-up, 2. Emergency Fund, 3. Other Savings Accounts, and 4. Investments. Please do keep moving. Start slow but do not stop. For daily motivation like us on Facebook, Twitter and/ or Instagram.

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EMERGENCY FUND ACCOUNTS

This post is mainly for our daily savings challenge members and readers who joined the monthly saving challenge. I thought I would easily compare various bank accounts that are better suited to emergency fund accounts. It seems it would take me forever to complete that kind of a task. I will just explain the account that I use for my own emergency funds. If your bank has a similar account, you might consider using it. If they have a better account, that is even better.

emergency fund accounts

Emergency fund accounts are meant for emergencies. No surprise there. There has to be a high level of liquidity in the account you choose with cash being available almost immediately. The account used has to earn interest. My bank has an account with both features. I use a 24 hour or one day notice account as my emergency fund account. You make a 24-hour notice to withdraw. It is very convenient for quick access to cash.

More on this money market account:

• To open this particular account, one needs a minimum amount of R500. Hence, I thought most of our daily saving challenge members can use similar after keeping their two weeks savings of R560.
• 5.25 percent interest (at the time of publishing) is not bad at all for the typical funds of between R2,500 and R25,000. I realise that most banks do not have good interest rates on savings and money market accounts. I have seen below 3 percent for accounts similar to the one that I use. 
• Whenever I need funds, I make a notice a day before my withdrawal. It could be an evening before the day I need the funds. In this way it is not strictly applying the 24 hours waiting period.
• I have not created a stop order for my funds to be transferred into this account, but this is possible and a good thing to do. This way one can automatically pay themselves first.
• My emergency fund is capped at about R10,000. So, I will never get the 6.2 percent interest rate earned on a R50,000 balance. I am pleased with the 5.25 percent that I earn. 
• It is important to choose an account with no monthly fees or commissions. Most of them do not. 

Please look at the features above and get an account from your bank that works in a similar fashion. Funds have to be available immediately or almost instantly. The account has to earn interest. Time value of money is a thing.

Please like us on Facebook and on Instagram.

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MONTHLY SAVINGS CHALLENGE

Since I posted the daily savings challenge plans two posts ago, a few readers requested that we embark on a monthly savings challenge as well. It makes perfect sense as most of my readers get paid once a month.

monthly savings challenge

Anyway I also want to thank all of you for joining the savings drive. Those who follow us on Facebook have sent amazing messages. Remember to like our Facebook and our Instagram page. It is easier to inspire and encourage each other in social media platforms. And our hashtag is off course #SavingCommunitySA because we are building a community of savers.

We will once again choose the plan we are comfortable with from the four in this article. By the end of the month or whenever we get paid, we will open our emergency (or any) fund accounts. We will post the suitable accounts here for each reader to choose. The 24 hour (one day) notice account requires about R500 initial investment. The ETFs require about R300 per month. Please remember that each plan has our investment or own contribution and no interest added. We will save everything in interest bearing accounts or stocks.

Know your WHY. Are you saving towards building:

• Emergency fund.
• Children school fees fund.
• Deposit on their home.
• Deposit on their car.
• Investment for retirement.
• Investment for passive income.
• Business capital.
• ETC.

 I wish us all the very best in this monthly savings challenge. Keep pushing.

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DAILY SAVINGS CHALLENGE

This daily savings challenge is my idea of fun. I know, I'm even more boring in real life. Get over it people. Here goes the fun. We have six daily savings plans for you to choose if you are joining. I so hope you are. We are saving up to R150,000 (about $12,500) per year each. This is an accountability stokvel and savings club of sorts.

How it Works:
We will each choose the plan we are comfortable with from the six listed below. We will then save our daily amount mentally and leave it wherever it is. We will then open our emergency (or any) fund accounts in 2 weeks time. The 24 hour (one day) notice account requires R500 initial investment. The ETFs require about R300 per month. Please remember that each plan has our investment and no interest added. We will save everything in interest bearing accounts or stocks.

Some of our readers are saving towards building their:

1. Emergency fund.
2. Children school fees fund.
3. Deposit on their home.
4. Deposit on their car.
5. Investment for retirement.
6. Investment for passive income.
7. Business capital.
8. ETC.

Remember, depending on each one's needs, one can save in a notice account, money market account or invest in exchange traded funds (ETFs) for better returns. For those who prefer a monthly plan, we'll work on a few options for the beginning of next month. For now, choose from one of our daily savings challenge plans below.

daily savings challenge

This is our basic daily savings plan. You may just save R280 per week. If you convert it into a monthly savings plan, you will save less because there are a few extra weeks in a year. A year is not made of exactly 4 weeks per month. Keep records of this and follow us on Facebook to keep track of where we are.

daily savings plan

 Above is the double of the basic plan. A number of the readers can spare more than the R500 per week. Remember again that if you convert it into a monthly savings plan, you will make less because there are a few extra weeks in a year. Keep moving with us.

And now we look at half of the basic plan. Students and young professionals who are starting out might go for this plan. The most important part of building wealth is consistency. We are developing a culture of saving here more than anything.

Below are R50K to R150K daily savings plans.

All the best to you. I will keep reminding all of us on our Facebook page. Stay tuned.

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MONEY MARKET INVESTING

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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Monthly Spending and Budget Report-May 2012

My very first monthly spending and budget report for 2012. Its so embarrassing that I never reported on this for four months. The result of that was me losing my focus and off course I'm back to my straight and narrow. In the news this past three months, we made an offer on an amazing commercial property and the deal fell apart. Then we decided to upgrade on our home, and changed our minds. Here we are now, happy with our smaller, cheaper to maintain home. Our son wanted a swimming pool badly but he'll live.

My May 2012 monthly spending and budget report:

INCOME	% OF TOTAL	NOTES
Real Estate	59%	I am hoping to reduce this by increasing other streams of income.
Hubby Allowance	31%	He is so cute.
Once off	9%	Money my sister used for her emergency.
Online	0%	I keep a hold on my online income until its reasonable. In June I am getting the online income for a few months. I will only record then.
Dividends	0%	2012 will be spent growing this and other interest.

My online income is growing at a healthy rate. I'm also pleased that when my sister had an emergency, I was able to be a lender of an interest free loan. She gave it back in a month. Its great having a family. You get these interest free loans. She was very grateful, making this loan so very worthwhile.

ITEM	%OF INCOME	NOTES
Real Estate	18.9%	1 mortgage & taxes/rates.
RA & Unit Trusts	6.6%	Fixed
Loan to Business	0%
Internet/ Phones	1.5%	I manage to keep this very low.
Consumer	9.9%	Groceries, personal care and all that jazz.
Withdrawals&Fees	0.4%	This was a cash month. I withdrew cash twice.
Giving	12.4%	Back down.
To Invest	50.4%	So proud of me! And indeed I started my emergency fund which will soon be spilling over to my CD which we are laddering. From the unfortunate deal that didn't work well.

I worked on an exciting plan of laddering a CD portfolio. I had some money which would be part of the down payment to the commercial property. I changed my mind on laddering this and dividing it into five pieces. My thinking is having it in my special savings account which will also serve as our emergency fund.  I got a great 5.15% interest. However, if this goes to retail bonds, I can get up to 9% for a 5 year investment. I am just growing this  amount so I can take anything between R100,000 and R200,000 by the end 2013 to retail bonds for 5 years, then another one in 2013, and another in 2014. This will leave me with 5 pieces for a period of 5 years each. The question is, will I be able to save that much in a year, going forward. I just have to commit to it.

I had a vacant property for 2 months. This the first for me in 10 years. Its a very horrible experience. However, I hated the problems with the previous tenant even more. We signed an agreement for her to pay me what she owes in affordable payments over 6 months. I'm not holding my breath to receive all of it but I'm very glad the whole tenant-landlord relationship is over. I gave that unit to a real estate managing company. I've had enough with it. Its time I realize I am a real estate investor and not a property manager.

Keep cool those in warm countries and warm to those in cold countries. I will try the weekly blogging thingy. I wish myself luck with that.

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Dealing with a Vacancy and Late Rent Payments

One of the townhouses

Dealing with a vacancy is less frustrating than dealing with late rent payments in my opinion. Vacancies are inevitable and contracts makes it easier for them to be predictable. On the other hand, late payments are the evils that we should try to avoid at all costs. I have one tenant who is developing a habit of paying the rent late. It started with 10 days and then 15 days with R450 shortage. I must say that, I have now set precedence by accepting the 10 days with no consequences. Tough!


How to Avoid the Late Rent Payments
Getting the best tenant is key when managing your own property. So avoiding any kinds of tenant - landlord discrepancies start with the screening. The advertising should obviously be done properly, in the right form of media. But the real work begins with  the screening of the potential tenants. Get the credit history right or hire someone who can do that for you. No cutting corners. Credit worthy tenants, take care of their finances, and should take care of their spaces too, Right! Not necessarily, but I would still trust someone who takes care of their money, to take care of my property, to pay rent on time and to want stability...thus staying for a longer period than most.

Well, if the tenant who had a promising financial record and had you fight for her/him to get the place rewards you with a late payment, just make sure it happens once ONLY. Stick to the contract and its contents. I know, its not easy, but its the right way to do it. If the contract has an "interest on late rental" clause; implement it fully from the very first breach.

Yes I know, I never did that when my tenant paid late the first time. I thought of the relationship that we have, how I wouldn't want sourness and the daunting task of getting a new tenant. So the tenant did it again. I am now expecting this and will have my Emergency Fund waiting for the third time it happens.

The beauty with this is that I've learned a valuable lesson that I am so human and not as much of a business person as I'd like to think I am.

Dealing with a Property Vacancy
I actually am having a tenant serving a notice for September to leave by the end of the month. The one month notice is meant for me to get a replacement as quick as I can. At least that's what I am trying to do.The tricky part is showing the prospective tenants a place with the notice tenant. I have to work around her schedule. I cant go and show as I please but only in the evenings. The prayer is that the great tenant I get should be free at the same time the notice tenant and I are available.Eeeeessshhh.

Anyway, as a landlord, one should be having the savings to cover the costs during the vacancy periods. A few posts ago I was talking about how I need an emergency fund. I have savings that are not titled EF and mixed with family funds. I so pray that I don't get to use anymore of the family savings than I already have because of this vacancy.
I always choose to collect slightly lower than market rate rentals than deal with a vacancy for the following reasons:

• That way I miss out on R100 per month, instead of R5000 per month over a few months of the vacancy.
• My property has someone in it and not at a risk of being vandalized.
• I have peace of mind knowing that the rates and taxes are covered even if my net worth is growing slower. R200 or R100 in some cases would build up.
• Psychologically I feel all together and efficient that I have no vacancies. Some ego boost.

The best way in dealing with a vacancy and late rent payments is avoiding them. I haven't had more than two weeks of vacancy since I started in the business. I must give credit to better economic times in general.

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Emergency Fund

The story of my personal emergency fund is that---its non-existent. I know, pretty unbelievable. My point is that, I have access to funds in one of the properties.  We have paid up that one property as we were kind of saving our extra income in it. Anyway, I decided to have a separate emergency fund, yipee. Now, I can speak like a PF blogger.

On a serious note, the urgency of the EF is not brought by me wanting to follow PF blogger guidelines, if they even exist. I need it for two reasons,

1. with my properties needing this and that at awkward times;
2. the shock I had when I looked at how much I've spent during our last week long holiday made me realise I'm not as PF savvy as I wish. I'm far from frugal, not even close. And I don't make as much money as I made with a full time job.

So now, the only way is setting my emergency fund. I am starting with R1000 per month with R30000 target. That means I need 30 months if the contribution stays stable and I have no emergencies along the way. I don't know if I will be that patient. I will need to double this amount to reach my target in just over a year. Now that sounds more exciting.

I am not even sure if R30,000 is all I need for emergencies between 5 properties and a car that hardly leaves the garage. Its great motivation though, so I reach the target in this lifetime. Three years sounds like another lifetime. Now, where do I get R2000 to stash aside in the EF? I obviously have to cut my shopping, draw a budget when traveling and especially stick to it. I now know I'm not to be trusted with money, at least not to be trusted with my money. I do very well with other people's, like tenants' deposits.

My rental income grew by about R1500 in August. Another R500 is what I've been wasting in unnecessary shopping. Magazines come to mind, I will have to do with books for now. There comes the R2000. Easy, isn't it. Emergency F, here I come.

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