We all want to see our money grow. You may have a sizeable chunk to invest, or you may want to start small with whatever portion of your income you can put towards savings and investments every month. The question is, what’s the best way to grow your money?

Navigating saving and investing can be tricky if you’re a beginner. Contact a financial adviser to explain to you how different products work and help you identify which investments suit your circumstances best. Most banks have expert advisers who’ll be happy to guide you in the right direction.
 

Savings versus investments

There’s no official, black-and-white distinction between saving and investing, but in general, we think of savings as money you put aside so it will be available whenever you need it, aka an emergency fund, or for a short-term (less than 3 years) savings goal like buying a car or taking a dream holiday. You will earn interest on savings accounts, so your savings will grow. Typically, though, savings accounts are more conservative financial instruments, so they don’t grow as fast as investments.

When we talk about investments, we’re focused on the longer term (3+ years). Even with an investment like a unit trust, where you can access your money with one day's notice, your plan should be to leave that money invested for a long time instead. Avoid making early withdrawals unless you have literally no other option. Investments prioritise growing your money faster than inflation, and that means putting money into financial instruments with a higher risk of value fluctuations. To counteract that, your money stays invested for longer, so that temporary fluctuations in value will even out over time and the investment will show steady growth. This in turn means that an early withdrawal from an investment like a unit trust could crystallise a temporary loss that you would otherwise have recovered in the long term.

There are several types of investments, but unit trusts are popular because even if you’re new to investing, a unit trust buys you a share in a mutual fund of mixed investments offering attractive returns. Experts invest the fund’s money in a well-diversified range of instruments for you, so you don’t have all your eggs in one basket. If you can invest R250 or more every month, you can invest in unit trusts with Nedbank.
 

Investing will not make you wealthy overnight, but it is a reliable way of growing the money you already have. You don’t have to be a financial genius. Educating yourself on concepts like compound interest will show that a little can go a long way. When investing, it’s essential to remember that you are playing the long game, so don’t get intimidated by dips in the market.

Investments will help you preserve the value of your money in the future and will generate a passive income through interest and dividends. This makes them great for building generational wealth or a retirement nest egg.
 

What are some other savings and investment options?

The stock market

If you enjoy the thrill of risk, the stock market might be right up your alley. Stock trading essentially means that you own a small portion of a company when you purchase some of its shares. As the company grows, the value of its stock increases, which means you can later sell your shares at a profit. Knowing when to sell shares before a company’s stock value drops is also a skill that can help you turn a profit in online share trading.
 

Investment bonds

Buying bonds is a form of investment considered less risky and more stable than stock trading. When you buy a bond, you are basically lending money to a company or the government. Eventually, you will profit from the interest paid to you over the term of the bond.
 

Tax-free savings and investments

Tax is an expense you should consider when formulating a savings and investment plan. Every cent counts, and taking advantage of tax-free investments (TFIs) is a way to hang onto more of your hard-earned money. Any interest and dividends earned on these accounts are not taxed.
 

Nedbank offers these tax-free options:

Tax-free Savings Account  This allows you to save up to R36,000 a year, and a lifetime contribution of R500,000, in accordance with current legislation. The minimum deposit is R500, so they’re ideal if you’re starting small.

Tax-free Fixed-deposit Account To open this account, you need a minimum of R1,000. There are zero monthly fees, but unlike a savings account, you’ll have access to this money only at the end of the fixed-deposit term.

The limits of R36,000 a year and a lifetime contribution of R500,000 apply to the total contributions made on all the TFIs you may have. In other words, you can’t contribute a total of R1 million in your lifetime if you have both a tax-free savings account and a tax-free fixed-deposit account.
 

What to look for when choosing savings and investment products

The perfect option for you depends on your income, your financial obligations, your needs and your investment goals. Factors to consider include:

• Investment term Do you want to save for a short- or long-term investment?
• Opening deposit How much will you be able to invest immediately?
• Contributions Will you be investing a once-off lump sum or are you able to make monthly contributions and grow your money faster?
• Access to funds Will you need to withdraw from the investment in an emergency without paying penalties? Or do you have enough emergency savings instantly available in other accounts, so you can comfortably invest the money for longer and earn a higher rate?

Explore Nedbank’s wide range of savings and investment solutions to help you achieve your financial goals.