How many savings accounts should you have?

Saving with specific goals in mind creates a roadmap for your investment journey. It’s crucial that the savings accounts you choose meet your needs, that the interest you earn is competitive, and that you know exactly how long it will take to access your money.

It’s advisable to have a different savings account for each of your various savings goals. How many accounts you need depends on your circumstances and your plans for your future. Everyone should have an emergency fund and a diversified portfolio of investments for your retirement, so start with those.

Then consider: do you want to own your own home? Even if you start with a bachelor flat to get onto the property ladder, having a deposit when you’re ready to buy will make that purchase much easier. So maybe you need a plan over 2 to 5 years to save for that. Will owning your own vehicle make it easier for you to earn an income? Again, saving up a deposit first makes financing easier, so for this one maybe you need a savings plan lasting a year, or 2 at the most.

Perhaps you’re planning to have children – taking care of their education might require a solid 10-year savings plan. The more clearly you define your savings goals, the easier it will be for a financial adviser to help you choose the right accounts.

Access to funds

It’s important to know the terms and conditions of each account you choose, and what they mean for your savings goals. It’s no use locking away your savings in a long-term account if you may need the money immediately, or in 6 months’ time, say. Unlocking that money prematurely in an emergency may draw penalties and erode any returns you may have made on the investment.

For this reason, your savings strategy must incorporate short-, medium- and long-term goals so that you don’t struggle to access your emergency savings when you need them, but you can tie up your other investments for longer to earn a better bank interest rate.

Emergency fund

Start off with an emergency fund so you can access money immediately should you find yourself in a cash crunch. That way, in a crisis you won’t tamper with investments that are saved for the long haul. MyPocket, a free budgeting and savings pocket linked to your Nedbank account, is one handy option for an emergency fund.

MyPocket is not a stand-alone account; it is linked to an existing transactional bank account. But you can open as many as 10 pockets, each dedicated to a specific savings goal. You need just R1 to set up a savings pocket, and you earn interest of 3% on your balance up to R10,000. To make saving easier, you can set up recurring payments into any of the pockets – so your savings goals become part of your fixed monthly expenses, paid before you can be tempted to spend the cash on anything else.

Other short-term savings platforms

  • JustInvest is a perfect platform for short-term goals like a deposit on a house or car, or unscheduled expenses like vet bills and travel costs. JustInvest is an investment account that is linked to money-market conditions, with tiered interest rates, so your interest increases the more you invest. To open this account, you need a minimum deposit of R500, and you can make additional deposits of no less than R100 at a time. Once your emergency fund in MyPocket grows large enough, you can start a JustInvest account with R500, and add R100 whenever you can, to grow your emergency fund faster.

    JustInvest also is useful when your savings elsewhere have grown substantially, or when you have a large amount of cash on hand (perhaps from selling shares, a car or a house), and are still deciding how to invest that money long-term. Interest is calculated daily and paid or capitalised (added to your savings) monthly, and you can withdraw money with 24 hours’ notice – so it balances a better interest rate with almost-immediate availability.

  • Nedbank 32Day Notice Account offers a secure, attractive method of saving. You need a minimum amount of R250 to open an account, and you can arrange to save via monthly or weekly stop orders of at least R100 per month. There are no monthly fees or commissions. Interest rates are tiered, so the higher your balance, the higher your interest rate. You can choose to have your interest paid out monthly or capitalised.

    Remember, if you invest in any Nedbank notice account, you can also join the Structured Saver rewards programme to help you manage your savings and investments more effectively.

    When you need to withdraw money, you’ll have to wait 32 days before money is available. That’s handy if you’re serious about saving: if you withdraw from this account, it’s more likely to be for legitimate reasons rather than to splurge on an impulse. It’s also a good way to save for expenses that you know will come up at the same time every year, like school fees.

  • Nedbank Electronic 32Day Notice Account works just the same as the Nedbank 32Day Notice Account. It has the same requirements, same features, the same 32-day waiting period to get a portion of the money, but even more attractive interest rates. The only difference is that this account is exclusively available online to all clients, including Small Business Services clients, for a period of up to 60 months.

  • Nedbank MoneyTrader Account is a money market investment account that offers highly competitive rates linked to money market conditions. To open this account, you need a minimum amount of R50,000. Even if you withdraw money, your minimum balance must remain R50,000. Further deposits must be a minimum of R5,000. Calculated daily, interest may be paid out or capitalised monthly. You can access your money within 24 hours.

Medium-term saving accounts

  • Electronic Fixed-Deposit Account is a great way to grow your surplus cash by putting it away for a fixed period ranging from one to 60 months. You need a minimum investment of R1,000, and preferential rates apply because the account is opened and maintained exclusively through a Nedbank digital banking profile. No additional deposits are allowed on this account. It is available to any client who has access to a digital banking profile. There are no monthly fees or commissions.

  • Electronic Optimum Plus is an investment account open to clients 55 and older. You need a minimum deposit of R1,000 to open this account digitally. As with the fixed-deposit account, preferential rates apply because the account is opened and maintained exclusively through a Nedbank digital banking profile over one to 60 months. No withdrawals are allowed.

  • Fixed-Deposit Account is the non-electronic version of the account explained above, except that you need R5,000 to open the account at a branch. It is open to clients younger than 55. The investment term can be from one to 60 months, but no additional deposits are allowed. Interest is paid out monthly, quarterly, half-yearly, yearly or when the investment matures. No withdrawals are allowed.

  • Optimum Plus is also the non-digital version of the account explained above, open to clients 55 and older. You need a minimum deposit of R5,000 to open the account at a branch. No withdrawals are allowed.

  • Easy-Access Deposit Account has all the benefits of a fixed deposit, plus the option of accessing 50% of your original capital if you need it without sacrificing your interest rate. You need a minimum of R25,000 to open this account and are allowed 2 withdrawals during the 12-month investment term.

Long-term savings vehicles

If you want to save over the long term, a unit trust account is ideal since your money is invested in capital markets, growing interest exponentially over time. Other accounts to consider include the following:

  • Nedbank Tax-free Savings Account lets you save your money and enjoy the proceeds tax-free. Interest is paid out monthly. You need R500 to open the account and additional deposits are allowed, as long as they do not exceed R36,000 per year, up to a maximum of R500,000 lifetime contribution. These limits are set by government legislation.

  • Nedbank Tax-free Fixed Deposit Account is another way to enjoy tax-free interest. The minimum opening balance is R1,000. This account demands a slightly longer investment commitment of up to 12 months and interest is paid out monthly, quarterly, half-yearly, or yearly or when the investment matures.

With so many account options for saving, you’re spoilt for choice. Assess your goals and choose an account that will meet your financial aspirations.