8 ways to invest R500 a month wisely

You don’t have to put away money every month to start saving – reducing your debt and cutting unnecessary costs are other ways of saving.

To get you started, here are 8 different but all equally useful ways you can save every month. We’ve suggested that you aim to save R500 a month, but that’s just an example. If you can’t save R500, put aside what you can afford to commit every month, and all the better if you can afford to save more.


1. Pay extra into your bond

Paying an extra R500 into a R1 million home loan every month could knock nearly 3 years off your loan repayment period. At a prime interest rate of 7%, this would save you almost R120,000 in interest.


2. Pay extra into your credit card

Credit card debt is convenient, but it’s also expensive in terms of interest rates. Your extra R500 a month will ensure you pay less interest, and will also boost your credit rating because you’re using less of your available credit.


3. Opt for tax-free savings

A tax-free savings account is one of the best ways to build up a healthy nest egg. You can save up to R36,000 a year and a maximum of R500,000 in your lifetime. The big benefit is that you pay no tax on the interest that you earn. You don’t have to contribute the full R36,000 if you cannot afford it, and it will set you back only R500 to open a Nedbank tax-free savings account.

But if your budget is really tight, even R500 may seem like a huge amount of money. The good news is that there are clever ways to save. Through the Nedbank Money app, you have instant access to MyPocket savings accounts that need as little as R1 to open, and you will earn interest of 3% a year from day one. You can also open up to 10 MyPockets, each with a specific savings goal, like December holidays or a trip overseas, helping you to keep sight of the end goal.


4. Start a retirement annuity

A retirement annuity (RA) is a solid choice for your monthly savings. RAs are close cousins of insurance in the sense that you sign a policy that holds you to how much you pay every month for a defined period. The biggest benefit is that you get a monthly tax deduction for contributing to the fund, but only get your money once you turn 55. So, this is a sensible way to save for your retirement. If you can, invest your maximum contribution every year.  


5. Invest it in a unit trust

A unit trust is like an RA, and you can also pay your R500 into a unit trust fund every month. However, what you will earn is less defined, because your money is invested in a range of underlying investments and your return is linked to how well those investments perform. Unlike an RA, there are no tax benefits, but it is still a great way of diversifying risk exposure: instead of buying into a single company, your money is invested in more than one company or asset class.

Also remember that unit trust investments require a long-term view. This is not where you should put your money if you might need it in an emergency. For that, you should keep a rainy-day savings account that you can access within a short time. Once you’ve built up a decent balance in your rainy-day account, you can switch that R500 a month towards investing in unit trusts, which is good way to build long-term wealth.


6. Exchange traded funds (ETF)

This is another low-cost, low entry-point investment option for your R500. Your money goes into a fund that tracks the performance of listed assets. The idea is to spread you risk by investing in a theme (say, green energy) or a sector (say, mining and resources).


7. Education fund

There’s no time like now! Invest your monthly R500 in your children’s future. You can reduce your stress and improve your options if you start saving for an education fund today. Every bit you can save towards their education is worth it, and the earlier you start, the better.


8. Save for a rainy day

The easiest way to put aside R500 a month is still to simply open a savings account. A 7-day or 32-day notice account is a good option, because the interest rate will be slightly higher than a same-day or current account. And if you don’t have instant access to your money, you’re less likely to spend it just because you can.

Whichever option you choose, the point is that you don’t have to be wealthy to start building wealth. Start saving today to secure your financial wellbeing.