Suddenly you turn 19 and find yourself in the unreal adult world. You receive a letter in the post informing you that you should visit your branch and supply proof that you are either still a student or have completed high school. You must also bring your ID book and proof of residency. If you don't visit the bank your account will be closed.
You head off to the bank and they inform you that you are not longer eligible for a children’s account but that you need to change you account to a Student account as you will be studying next year.
You will now have to pay bank charges similar to an adult account and can get access to a credit card and overdraft facility. Whoa…wait a minute, an overdraft facility? Credit card? You only get pocket money, you have not even entered the workforce yet!
The biggest question is which account you should choose, which bank to deal with and what benefits you get from each.
I decided to compare bank accounts from the 4 major banks for this, the student level this time but I added Capitec bank, the Newbie bank that advertises a higher interest rate and lower charges. The only difference being that the 4 major banks supply cheque accounts while Capitec is a transaction account. Lets do the comparison:
Click here!
I would choose ABSA after all the considerations even though there is not interest. I would open a separate saving account to earn interest and take advantage of no transaction fees as ABSA has the most widely spread ATM’s.
Making use of either the overdraft or credit card is probably not advisable at student level and I would make sure that those services are kept for a later date.
Wednesday, November 25, 2009
Monday, November 23, 2009
What to do when you get a bonus or windfall?
It is that time of year again, when the lucky one’s will be receiving their Christmas bonus. You have probably already spent the money in your mind. Hopefully only in your mind and you haven’t already purchased something that will need to paid when your bonus is due!
Bonuses don’t come along everyday. As an employee you will generally get an annual bonus or a 13th cheque. Usually this comes in December, which gives added pressure to using it to pay for that awesome holiday or buy the kids those much wanted toys or video games. Maybe spoil yourself!
But you need to take a step back. These bonuses don’t come along everyday and yet these small windfalls could be used to get you financially secure for the rest of your life! You just have to decide to use them wisely.
So what is wise you may ask….
Sadly in this day and age the bank is not really the best place for you to save your money. The interest rates are low even on fixed term investments and the temptation to spend the available balance in your bank account is way too high for most of us to stand. If you do choose this option make sure it is an interesst bearing account you can't withdraw from for a fixed period of time.
2. Paying it into your mortgage Bond:
Placing the amount into your bond would be a wise decision, the total bonus will then be taken off your capital and your bond repayments will decrease permanently, any future interest rate hikes will have a lower effect and your property will be paid for in a shorter period of time.
If you fix your repayment amount to the current amount you pay your loan will be paid off in record time!
If you have other debts, however, this may not be the best option as the interest rate on your home loan is lower than other loans.
3. Settling an Account:
If you are paying down debt this may be one of your best options. You can settle a credit card, close your store account, pay off a personal loan or rid yourself of that pesky overdraft. These are high interest debts that you don’t need. The year ahead will look much brighter if you are able to save a little instead of live month to month.
4. Adding it to your Retirement:
Using the windfall to top up your retirement policy is another good option, we tend not to save enough towards retirement and an added capital injection would bring the policy payout up and turn it into a more inflation beating policy. Helping to ensure you retire without worry. The added advantage of this option is that on most retirement policies you are not taxed on the payout.
5. Investing
Starting an investment account for the stock exchange – risky but if you are young enough this option could end up being very profitable and help you realise your dreams. If you are a little older and more conservative but still want to invest, try a mutual account or purchase some unit trusts. Remember the key investment strategy is diversity! As the saying goes, “Don’t keep all your eggs in 1 basket”
6. Spending
If you were planning on making a big purchase using this to pay for it as a cash purchase as opposed to buying on credit is another option, not as good as investing but better than obtaining further credit. Perhaps you really need a fridge for your new apartment or your washing machine just gave up the ghost. Either way avoiding the debt trap is better than paying the extra interest!
Making the choice:
Deciding what to do with your windfall is dependant on your current position in life. Your past decisions and your future dreams will play a role. Choosing wisely can save you a pretty penny in the long run.
The worst thing you can do with a windfall is spend it on small items here and there. It disappears faster than you can say you had it. I use this trick for my bonuses and windfalls and it never fails:
Deposit the money into a saving account and do not touch it for 30 days.
If you keep it in the bank for the full 30 days you will have dreamt about what you should be spending it on or where you should be saving or investing it. You will have looked at your options, determining the consequences of each choice and you will make a wiser decision.
Bonuses don’t come along everyday. As an employee you will generally get an annual bonus or a 13th cheque. Usually this comes in December, which gives added pressure to using it to pay for that awesome holiday or buy the kids those much wanted toys or video games. Maybe spoil yourself!
But you need to take a step back. These bonuses don’t come along everyday and yet these small windfalls could be used to get you financially secure for the rest of your life! You just have to decide to use them wisely.
So what is wise you may ask….
- Putting this lump sum in the bank?
- Paying it into your mortgage bond?
- Settling an account?
- Adding it to your retirement saving?
- Investing.
- Spending it on something (hopefully a large purchase) you want?
Sadly in this day and age the bank is not really the best place for you to save your money. The interest rates are low even on fixed term investments and the temptation to spend the available balance in your bank account is way too high for most of us to stand. If you do choose this option make sure it is an interesst bearing account you can't withdraw from for a fixed period of time.
2. Paying it into your mortgage Bond:
Placing the amount into your bond would be a wise decision, the total bonus will then be taken off your capital and your bond repayments will decrease permanently, any future interest rate hikes will have a lower effect and your property will be paid for in a shorter period of time.
If you fix your repayment amount to the current amount you pay your loan will be paid off in record time!
If you have other debts, however, this may not be the best option as the interest rate on your home loan is lower than other loans.
3. Settling an Account:
If you are paying down debt this may be one of your best options. You can settle a credit card, close your store account, pay off a personal loan or rid yourself of that pesky overdraft. These are high interest debts that you don’t need. The year ahead will look much brighter if you are able to save a little instead of live month to month.
4. Adding it to your Retirement:
Using the windfall to top up your retirement policy is another good option, we tend not to save enough towards retirement and an added capital injection would bring the policy payout up and turn it into a more inflation beating policy. Helping to ensure you retire without worry. The added advantage of this option is that on most retirement policies you are not taxed on the payout.
5. Investing
Starting an investment account for the stock exchange – risky but if you are young enough this option could end up being very profitable and help you realise your dreams. If you are a little older and more conservative but still want to invest, try a mutual account or purchase some unit trusts. Remember the key investment strategy is diversity! As the saying goes, “Don’t keep all your eggs in 1 basket”
6. Spending
If you were planning on making a big purchase using this to pay for it as a cash purchase as opposed to buying on credit is another option, not as good as investing but better than obtaining further credit. Perhaps you really need a fridge for your new apartment or your washing machine just gave up the ghost. Either way avoiding the debt trap is better than paying the extra interest!
Making the choice:
Deciding what to do with your windfall is dependant on your current position in life. Your past decisions and your future dreams will play a role. Choosing wisely can save you a pretty penny in the long run.
The worst thing you can do with a windfall is spend it on small items here and there. It disappears faster than you can say you had it. I use this trick for my bonuses and windfalls and it never fails:
Deposit the money into a saving account and do not touch it for 30 days.
If you keep it in the bank for the full 30 days you will have dreamt about what you should be spending it on or where you should be saving or investing it. You will have looked at your options, determining the consequences of each choice and you will make a wiser decision.
Friday, November 20, 2009
Bank Fees: Kids Saving/Transactional Accounts
“All under 18’s bank accounts are equal.” Well that is what I thought. Surely they don’t charge management fees to a child! Can I not deposit the coins my child has saved for months in his piggy bank into his account for free? Doesn’t everyone give a good interest rate to children to inspire a culture of saving from a young age?
If you are anything like me, you have never shopped around looking for the lowest rates on your bank account, especially not on your child’s bank account. If your child has a bank account you probably did what I did and opened an account at the same bank you currently bank with. But is this always the best decision?
This morning I received a statement on my child bank account and was shocked. He had paid a monthly account free, a cash deposit fee and an ATM withdrawal fee. These fees totalled: R 54,50. For a child of 9 years of age I felt this was a lot. He also has a balance in his account of over R 2000.00 and earned a measly R1.90 interest.
In these times where a poor saving habit is a culture, it should be more important than ever to encourage our children to save. After speaking to the call centre consultant at the bank I decided to compare under 18 bank accounts to find the best deal for my child.
I have drawn up a comparison table between the 4 major South African banks. I have not included all the fees as most of these fees would probably never be charged on this account. I have only added the most commonly used fees and interest rates, omitting items like dishonoured cheques (most children do not have cheque book) and R/D cheque returns (Most children do not receive cheques from anyone). Telephone and Internet banking fees (can your under 18 really perform complex transactions?) Debit orders (under 18’s don’t have credit accounts) etc.
So for basic banking fees that your child will probably use:
Click here!
From my rankings I have decided on the Standard Bank sum1 account. Even though the fees could be higher if the account is misused, the interest rate is much higher.
Transactions limits for my child are set at:
If you are anything like me, you have never shopped around looking for the lowest rates on your bank account, especially not on your child’s bank account. If your child has a bank account you probably did what I did and opened an account at the same bank you currently bank with. But is this always the best decision?
This morning I received a statement on my child bank account and was shocked. He had paid a monthly account free, a cash deposit fee and an ATM withdrawal fee. These fees totalled: R 54,50. For a child of 9 years of age I felt this was a lot. He also has a balance in his account of over R 2000.00 and earned a measly R1.90 interest.
In these times where a poor saving habit is a culture, it should be more important than ever to encourage our children to save. After speaking to the call centre consultant at the bank I decided to compare under 18 bank accounts to find the best deal for my child.
I have drawn up a comparison table between the 4 major South African banks. I have not included all the fees as most of these fees would probably never be charged on this account. I have only added the most commonly used fees and interest rates, omitting items like dishonoured cheques (most children do not have cheque book) and R/D cheque returns (Most children do not receive cheques from anyone). Telephone and Internet banking fees (can your under 18 really perform complex transactions?) Debit orders (under 18’s don’t have credit accounts) etc.
So for basic banking fees that your child will probably use:
Click here!
From my rankings I have decided on the Standard Bank sum1 account. Even though the fees could be higher if the account is misused, the interest rate is much higher.
Transactions limits for my child are set at:
- 1 Cash withdrawal a week.
- Piggybank saving deposits are limited to R100 once a month.
Saving Tip #5: Everyday changes
Learn to bake….this sounds crazy but baking from scratch at home is both fun for the family as well as a cost effective way to get treats without the sting of the high prices. Don’t use premix packets as they are much more costly than the basic ingredients.
Learn to cook….yes I know you cook every evening. But try not to use instant meals from a packet or box as these are very expensive. Rather try a few recipes, swap with friends, look up the recipes on the net. It takes no longer to make spaghetti bolognaise from scratch than from a box but costs half the price, as does, chicken a la king, beef stroganoff or a stew. Use packets of soup for casserole bases as these are cheap and have similar spices to the box meals.
If you live in a complex or are friendly with the neighbours try starting a dinner club, where everyone meets at one person’s house for supper on a rotational basis. It is cheaper to feed many and you don’t have to cook every night. It is also a cheap way to socialise to boot!
Buy in bulk! Coke wholesalers, Makro, Trade centre among other offer great discounts on bulk purchases. Take advantage of specials and split the spoils and the costs with your friends and family.
Take your supper meat out the freezer in the morning and leave it in a bowl inside the microwave (to keep flies away and stay out of direct sunlight) to defrost. When you get home you do not need to run your microwave to defrost your meat.
Fix any water leaks immediately, a dripping tap can use up to 420 litres of water per year. To test for a water leak, turn off the stopcock and see if your water meter is running, it should not be.
Switch off your stopcock on the incoming water pipe if you go away. If any leaks occur or you left a tap dripping this will be of no consequence and won’t increase the cost for your vacation.
Pay all accounts on time! I cannot emphasis this enough. Late payment fees, interest, penalty interest and administration fees add up. Not to mention how much more you pay if you are handed over to a lawyer for collection.
Extra penalties are charged on some accounts: E.g. Electricity, there is interest on overdue amount, R 25 final notice fee and R 150 reconnection fee if disconnected. That starts to add up and is probably the equivalent to a month’s water bill.
Learn to cook….yes I know you cook every evening. But try not to use instant meals from a packet or box as these are very expensive. Rather try a few recipes, swap with friends, look up the recipes on the net. It takes no longer to make spaghetti bolognaise from scratch than from a box but costs half the price, as does, chicken a la king, beef stroganoff or a stew. Use packets of soup for casserole bases as these are cheap and have similar spices to the box meals.
If you live in a complex or are friendly with the neighbours try starting a dinner club, where everyone meets at one person’s house for supper on a rotational basis. It is cheaper to feed many and you don’t have to cook every night. It is also a cheap way to socialise to boot!
Buy in bulk! Coke wholesalers, Makro, Trade centre among other offer great discounts on bulk purchases. Take advantage of specials and split the spoils and the costs with your friends and family.
Take your supper meat out the freezer in the morning and leave it in a bowl inside the microwave (to keep flies away and stay out of direct sunlight) to defrost. When you get home you do not need to run your microwave to defrost your meat.
Fix any water leaks immediately, a dripping tap can use up to 420 litres of water per year. To test for a water leak, turn off the stopcock and see if your water meter is running, it should not be.
Switch off your stopcock on the incoming water pipe if you go away. If any leaks occur or you left a tap dripping this will be of no consequence and won’t increase the cost for your vacation.
Obey the road rules. Traffic fines are an expensive unforeseen cost that if left unpaid could land you in jail. The 2 minutes you saved skipping the stop or speeding can never make up the cost of a fine.
Save for luxury purchases. Do not charge them to your credit card. If you don’t pay interest on the luxuries you buy, you can save between 17% and 25% of the cost of the item.
Pay all accounts on time! I cannot emphasis this enough. Late payment fees, interest, penalty interest and administration fees add up. Not to mention how much more you pay if you are handed over to a lawyer for collection.
Extra penalties are charged on some accounts: E.g. Electricity, there is interest on overdue amount, R 25 final notice fee and R 150 reconnection fee if disconnected. That starts to add up and is probably the equivalent to a month’s water bill.
If you cannot meet your monthly instalment, phone your creditor. They are more likely to help you if you called them rather than the other way around. They may even waiver some penalties and interest if you make a firm arrangement and stick to it. They just want their money after all.
Don’t under estimate the power of a phone call. Call every credit card supplier and ask for a reduction on your current interest rate. Use the fact that you have been a longstanding client of theirs or that you pay more than the minimum balance every month to your advantage. If your credit record is good, tell them you have been offered a card at a lower interest rate, most suppliers will match that rate.
Not all these saving tips will apply to everyone, you may already be using some. But if you are not, it’s never to late to start. Be creative with money saving ideas, try to use your savings to create further savings. If you are conscious of saving money you will be amazed at how quickly you can become debt free.
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