If you have saved some cash that you don't want to keep under your pillow, you probably need to open a savings account.
Many people want to put something aside for a goal, for retirement or in case they are retrenched, but does a savings account really help you to save?
The banks say consumers' lack of discipline, and not the structure of savings account or low interest rates, are to blame for people finding it difficult to save money.
Erik Larsen, the media relations manager at Standard Bank, says if you use a savings account, you can earn interest which will help you to grow your capital over time and it will help you avoid the temptation to spend. He says if you truly want to save, you will not be affected by transaction fees on savings accounts because you won't have many transactions, apart from deposits.
Standard Bank offers an E-Plan savings account that allows you to save and transact. The account has a savings "pocket" to which you can allocate a portion of the money that you pay into your account every month. For instance, if the salary or wages paid into your E-Plan account is R1 000, you can allocate R100 to your savings pocket.
If you want to change the amount you have allocated to your savings pocket, or if you want to access the money in the pocket, you have to visit your bank branch with positive identification - you cannot make alterations at an ATM.
With the E-Plan account you can have a minimum balance of as little as R20, although at this level you will not earn any interest.
The E-Plan account offers you incentives to save, such as interest paid daily and bonus interest if you maintain a balance of at least R250 in your account for six months or longer. Savers who maintain this balance will also be in line for cash prizes of up to R10 000 every month, Larsen says.
Ann Bramhill, the media relations manager at First National Bank (FNB), says only self discipline can help you to save. She says banks offer products which encourage saving and offer convenience and security, but it is up to you to use these properly. FNB offers a BobSave savings account, but most people use this account for transactions rather than as a true savings vehicle, Bramhill says.
In most instances, the banks only charge fees on savings accounts when you use the account for your daily transactions.
To encourage saving, interest rates increase as the size of the balance increases. According to many banks this means that you must maintain a balance of at least R500 to earn interest on your savings.
Bramhill says that, if you want to build a nest egg in a savings account, you should try to save at least five to ten percent of your salary every month.
Gayle Rodrigues, a media relations manager at Nedcor, says the Peoples Bank Powersave account is specifically designed to assist you to save and is not designed for transacting. The Powersave account restricts you to one cash withdrawal a month and offers tiered interest rates (the more you save the higher the interest you earn), to encourage you to put more money away.
The Powersave account does not allow debit orders and stop orders. Also, if you maintain an average monthly balance of at least R1 000 in your account, maintenance fees and certain transaction charges will be waived. If you only want to transact and not save, then the Peoples Card Transmission Account is a better option. This account is similar to a cheque account but does not offer a cheque book or overdraft facilities.
Kim Baas, a spokeswoman for NBS, says a savings account has lower fees than a transmission account to encourage you to save regularly.
Julie MacLiam, from Absa, says a savings account is an ideal way to save smaller amounts of money.
Absa offers two savings accounts, a FlexiSave and an ActiveSave account. On these accounts fees are charged only when you make cash withdrawals or transfers. If you open the account to save, fees are kept to a minimum. For instance, if you deposit at least R200 a month into your account, you won't be charged cash deposit fees.
If you have an Absa Activesave account and your balance is R4 500 or more, you don't pay transaction charges; you only pay a monthly administration fee of R5.70.
Minimum balances
With the Standard Bank E-Plan account, you can have a minimum balance of as little as R20, but you will not earn any interest on your balance until you have R250 or more in your account. Then you will earn one percent a year on the balance. However, you can earn a bonus interest of three percent on top of the one percent if you maintain a balance of R250 in your account for six consecutive months.
The minimum balance on an Absa Flexisave account is R50 and for the Activesave it is R500. You earn interest at 0.25 percent a year if you maintain a minimum balance of R500 in your account.
Herman Engelbrecht, the general manager of Pep Bank, a division of BoE Bank, says the Pep savings account pays six percent interest on credit balances starting from R1 and the minimum balance is only R10.
The minimum balance on an NBS savings account is R20, while FNB's BobSave has a R50 minimum.
At Permanent Bank you must deposit at least R500 to open an account, but your balance can drop to a minimum of R30. You only earn interest on your savings if you maintain at least R500 in your account.
Transaction fees
Major stumbling blocks to building up savings are transaction costs and monthly service fees, which erode your savings. If you can only put away R10 every month, you could find that more than half of it disappears in monthly service fees.
On top of that, you often don't earn interest on lower balances, so you could find your savings efforts going backwards.
The two savings accounts offered by Absa - ActiveSave and FlexiSave - have different monthly fees. The monthly fee of R3.80 applies to both savings accounts, but with the ActiveSave account if the balance drops below the minimum balance of R500 during the month, you are charged R5.70 for that month.
The monthly service fee at Pep Bank is R3.50. At Standard Bank the R7 fee is only charged if the balance is less than R1 000. On January 1, 2002 this fee will increase to R8.50.
FNB and Permanent Bank savings accounts do not attract monthly service fees. However, Permanent Bank charges R14.25 if the balance dips below R3 000. FNB charges a monthly management fee of R3.42 if the balance slips below R4 500.
What you need to open a savings account
The requirements for opening a savings account vary widely between the banks.
In order to open a savings account at Permanent Bank and Peoples Bank you must earn at least R3 000 a month, but there is some discretion for pensioners and other categories of people, such as students and housewives.
By contrast, BoE's Pep Bank only needs to see your South African identity document and a minimum deposit of R10.
The NBS Cashplus savings account is open to everyone whether you are employed or unemployed and there is no minimum balance.
Absa will open an account for you as long as you have the required minimum deposit. For the Absa ActiveSave account, the minimum opening deposit is R50 and for the FlexiSave account you need at least R500.
At Standard bank you can open an E-Plan savings account with a deposit of as little as R50. This is open to anyone who has a valid South African identity document.
Some truths
- You generally do not earn interest on amounts under R500;
- If you use your savings account for day to day transactions, transaction charges will eat away your savings;
- Banks often offer different accounts: make sure you have the right account for saving, and not one in which the charging structure is higher;
- Some banks offer you free transactions if you maintain a minimum balance in your account; and
- ATM transactions are much cheaper than over-the-counter transactions.