According to an annual FinScope survey, which tracks the use of financial services products in South Africa, a whopping 62% of South Africans simply don’t save. If you are among this majority of the population, the first thing to remember is not to panic. The next thing to remember is not to continue doing nothing about it! Not surprisingly, you might be stalling because you’re a little intimidated by the multitude of options available on the market.
There is no time like the present, so don’t put off investing any longer. You need as little as R1 000 to start securing your future financially. You also need to understand a few basics so that you can select the right investment option. For instance, investing is just one important element within personal finance – others include drawing up a budget and then sticking to it, saving money towards major purchases or holiday, and managing debt appropriately. Be mindful of these and ask plenty of questions. Remember, your situation is unique so your investment requirements will be too. There is no one-size-fits-all solution.

Carmen Whateley, Head of Nedbank Funding and Payments, answers some key investment questions – read them carefully because this could literally change your future:

What is the difference between saving and making an investment?
Saving, in the form of a savings account, entails putting a certain amount of money away each month with relative immediate access. However, the interest rate gained depends on the balance in your account. Meanwhile, making an investment requires that you put a lump sum away at once and may not touch the money until the agreed period is up. By making the lump sum inaccessible to you for a period of time, you are enabling your money to appreciate in value. Investment options have evolved over time, with financial institutions providing some flexibility to the products offered.

What exactly does a fixed deposit mean?
A fixed deposit allows you to earn higher interest on your money by putting it away with a bank for an agreed time period, ranging from 1 month to a few years. Investors can opt for longer term or shorter term fixed deposits according to their needs. With a fixed deposit, capital is guaranteed.

What are some of the potential risk elements to look out for when making an investment?
Ask about the penalties levied if you need to take your money out before the agreed period. Also be careful of investment options that carry great risk – you need to ask yourself if you can afford to run the risk of potentially losing your hard earned money.

What is considered by the industry as a good interest rate?
A difficult question to answer because each product is so different. In the current economic environment, many South Africans are looking for investments that are risk free, but still provide returns that keep up with inflation. If you are looking at a fixed deposit investment, then you should expect an interest rate of anything from 6,50% to 7,60% p.a..

It’s worth doing your homework and checking out the different options available. Nedbank’s Everyone Wins promotion, for example, provides a fantastic value proposition. It’s a 6-month fixed deposit account that offers a highly competitive rate of 6,75% p.a.on an investment of a minimum of R1 000*. There is absolutely no risk as the capital is guaranteed – in addition a bonus rate is guaranteed and 5 lucky clients stand the chance of doubling their interest (to a maximum of R50 000). * Clients aged 55 years and older stand to get an even higher rate of 6,90%p.a. Rates are correct at the time of publishing, but are subject to change without notice.

So if I invested R100 000, how much could I potentially expect to earn after 6 months? R3 375.