Many people on the street put any spare money they have away in a savings account, but there are alternatives which may yield a higher return on your investment. The Swazi Observer gives a quick rundown of a couple of options:
Banks offer accounts that can be used for savings, such as Savings, Call, Current and Fixed deposit accounts. These accounts allow potential investors to put aside money they may need for their day-to-day expenses. A savings account is especially good for keeping “emergency” funds. It normally pays a low rate of interest compared to other investment instruments. Most people prefer holding accounts with banks for security and the fact that accounts such as a Current account are attractive to businesses for their cheque facility and the link with services like internet banking and automated teller machines which allow for transactions to be facilitated without personal visits to the banks. These types of accounts allow one to start with minimal amounts. However, they have limitations. Due to the low interest rate, this type of account is not advisable for medium to long term period.The fact that you have easy access to your money does not motivate one to keep money long-term. The availability of access cards makes it impossible for one to keep funds in the account for a desired period. It requires a lot of discipline from the investor which most of the time is not an easy exercise. Given the above listed limitations on savings accounts, a fixed deposit account would be the better alternative. Fixed deposit accounts keep money for a certain period of time. The interest rate in this type of account is a bit higher than a normal savings account.
Bank accounts are the most widely operated method of saving money, but as mentioned above, they often have a low interest rate, particularly in today’s climate.
An alternative account to keeping your cash in is the Money Market Fund. It operates more or less like a bank call account. It can be suitable even for short term as well as long term investment depending on the goals and objectives of the investor. Money market fund is a mutual fund that collects investors’ money and invest it in short term debt instruments that mature in 90 days. Even though the interest rate varies, not fixed, it is higher than that obtained in a simple savings account. The history of this fund shows that the principal investment stays intact. An investor can either withdraw part or any amount at any time but is required to have a minimum balance which is agreed upon with the financial advisor. Money market funds earn interest on a daily basis but credited monthly to the investor’s account. You can either redeem the interest or re-invest it. By re-investing, the investment is able to generate earnings on the re-invested interest.
It is adviseable to save money first before risking it in investments, as the saying goes – don’t bet what you can’t afford to lose!
