In the days before digital banking, it was easier to believe that “cash is king”. You could stash your cash in a biscuit tin or under the mattress. Making a withdrawal or payment was simple: you got the cash out and paid the bills. 

Unfortunately, old habits die hard and many people still prefer having cash in their hands and stashed in secret hiding places, says John Manyike, head of financial education at Old Mutual. 

Some people, like Sister Nana, who recently featured on Khuzeka, the Old Mutual-sponsored financial reality show on DStv channel 157 (Moja Love), would seem to have little choice in the matter.

Sister Nana is blind and earns her living from the rental money she receives from 10 tenants who occupy rooms in her home. Each month, she receives her rent and then squirrels the money away, drawing cash from the stash as needed. This is a situation that carries several risks.

“Nana is extremely vulnerable. She has no way of knowing if the tenants have paid the full rentals owed or if all 10 of them are paying their own amounts. Her disability and habit of keeping the cash at home also make her a target of unscrupulous people and thieves,” says Manyike.

“She has a son but he does little to help his mother. She relies on the assistance of an ‘adopted’ son for her day-to-day needs and financial transactions. During the show, Old Mutual suggested several things that would make things better for the old lady.” 

The benefits of digital banking 

The first step is to get her money out of the house and into a bank account. There are many benefits to digital banking. The advantage for her is that it becomes simple to track who has paid their rent and who hasn’t. The monthly statement will confirm how many deposits were made each month, the value of each deposit and the total collected.

This also builds a positive profile for her should she wish to access credit to capitalise her small business. Technology has also made it easy for people in her condition to have their messages dictated to them.

Digital banking makes control a lot easier. Instead of cash, a card provides access to securely stored money. Essential payments can be made without leaving home and at any time to suit the account holder. 

“Although a small fee could be charged for the service, it could be offset by the interest payable on the account,” says Manyike. “If the balance grew over time, Nana would benefit from the compound interest that would help her money grow — something that doesn’t happen to cash gathering dust under a mattress.”

Watch a preview of the episode below: 

Manyike says Nana could benefit from examining how the accommodation business is being run. 

“The chances are that if the business is being run on a cash basis, a costs/benefits analysis hasn’t been done. This may sound difficult, but it is simple. Someone has to examine the costs of the business because water and electricity prices constantly rise, as do rates and taxes.

“The costs of these services must be deducted from the rentals. If these services are included in the rent, and the tariffs haven’t been increased for some time, the building owner is losing money and is funding her tenants. Adjusting the rent to account for these increases will benefit Nana positively.

“Making sure that people are paying market-related rent is easy. All it takes is a quick survey around the neighbourhood to see what people are paying for similar facilities,” says Manyike.

“The lesson to be learnt is that assets, like rooms to rent, should never be taken for granted. They can provide steady incomes but will only reach their full potential if costs are monitored regularly and adjustments are made as needed.”

To learn from money mistakes and strategies for building your bank balance, tune into Moja Love, channel 157 on DStv, every Sunday at 7.30pm.

This article was paid for by Old Mutual.