Are you not interested in earning interest?
Many of us don't know what we earn
South Africans appear to be paying no attention to the interest they’re earning on money in their savings accounts, if research by Capitec bank is anything to go by.
A recent series of polls by the bank found that 59% of respondents with a savings plan don’t know how much interest they’re earning. And a whopping 86% of respondents don’t know what “lazy money” is.
Lazy money is cash in a transactional account that doesn’t earn interest but does incur fees. According to Capitec, Reserve Bank statistics and research from analysts reveals “there is R295-billion worth of lazy money in South Africa”.
If this money earned just 4.75% interest a year, it would put over R14-billion back into the pockets of South Africans, the bank says.
Capitec was the first bank in South Africa to offer interest on a positive balance in a transactional account. The bank is currently paying interest at a rate of 4.75% a year on lazy money. But clients can earn up to 8.55% a year if they make use of the four free savings accounts linked to the bank’s one and only account – the Global One account.
“Your transactional account should grow your money and not just hold it,” says Francois Viviers, Capitec’s marketing and communications executive.
Unfortunately, most South Africans don’t earn interest on money in their transactional accounts.
TymeBank pays interest of up to 10% a year on money in GoalSave, which is a savings account linked to the bank’s Everyday Account. A GoalSave is a pocket or sub-account much like a savings account linked to Capitec’s account. These savings pockets attract no fees or penalties. Similarly, First National Bank is paying interest of 5.25% on the savings account linked to its Gold Fusion account.
But the rates offered by Capitec’s competitors are on savings pockets or plans linked to transactional accounts and not on the transactional account itself.
The polls by Capitec also revealed that 20% of respondents don’t know what a savings plan is and 40% don’t have one.
“A savings plan is a savings account at a bank, usually dedicated to a specific savings goal, like a holiday, studies or starting a side hustle. Savings plans generally offer higher interest rates than [the interest offered on] transactional accounts, meaning your money works harder for you [in a savings account],” the bank says in a media release.
“Make the most of your savings plan and pay yourself first by transferring some of your money into it at the beginning of each month. The easiest way to do this is to set up a recurring monthly payment on your bank’s app, which takes the thinking out of saving.”
Capitec advises that apart from the interest you can earn, also check your bank statement to see how much you pay each month in bank fees. “The average Capitec client pays just over R50 a month in fees. Rather move the money you would have spent on bank fees to a savings account.”
Viviers says that banking digitally helps customers control their money. “Use your bank’s app to keep track of your spending in real time. Digital banking allows you to check balances and view statements to see where key spending areas are. It makes it easier to identify unnecessary expenses.
“If you save R500 a month at an interest rate of 7% a year it adds up to over R1.2-million in 40 years, thanks to the power of compound interest. Imagine what cutting back on eating out or unnecessarily high bank fees could add up to over your lifetime.