Wondering what to do with your spare cash?

File picture: Sxc.hu

File picture: Sxc.hu

Published Jul 30, 2016

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Johannesburg - Fincheck says it has noticed a dearth of reliable information available to South Africans about what to do with spare cash.

Read also: Tax-free savings accounts: what you should know

CEO Michael Bowren notes that “finding accurate information that is easy to compare about exactly what is on offer from a savings perspective is very difficult.

“For people with spare cash, there are far more options available than just a standard savings account which tends to give only 2-5 percent interest. Consumers can consider fixed deposits, peer-to-peer lending and Bitcoin, or even livestock.”

Bonds

Bowren advises South Africans must first pay spare cash into their bonds. This reduces debt, but is also a form of savings as they are putting money into a property investment – an asset.

“Many people mistakenly consider their vehicles as an asset. Generally speaking, cars are a liability; they are only an asset if they earn you money, for example, a taxi service.”

Fixed deposits

Fixed deposits are offered by the big financial services providers, and provide consumers with a higher rate of interest than a regular savings account. Interest for fixed deposits can range from 4 to 19 percent.

“The benefit of a fixed deposit is that consumers can select their terms and decide how liquid they want their money to be. Notice periods and interest rates vary, depending on the terms. Longer notice periods offer higher interest rates, but the money cannot be withdrawn before maturity,” says Bowren.

Peer-to-peer lending

Peer-to-peer lending is a method of lending money to individuals or businesses through an online service that matches lenders directly with borrowers.

“Fincheck currently compares the costs of products offered by two peer-to-peer lending companies, though we expect this number to increase as the concept becomes better known in South Africa.”

“Peer-to-peer lending companies operate entirely online and can achieve lower overheads. Lenders earn higher returns compared to most savings and investment products offered by banks, while borrowers can borrow money at far lower interest rates. The peer-to-peer lending company takes a small fee for match-making the borrower with the lender and for credit checking the borrower,” says Bowren.

Bitcoin

Fincheck.co.za also compares the digital currency Bitcoin in real time – the information updates every few seconds on the Fincheck portal. Bitcoin is an online international currency.

Bowren says, with regular currency, a government can print more money to inject it into the economy, but this only causes its value to decrease and the prices of goods and services to increase. This cannot occur with Bitcoin as only 21 million coins exist and no more will be created.

“A bitcoin savings account allows you to safely deposit coins to earn interest or save for the future. Consumers can pay for bitcoins in a number of ways depending on who they are buying them from and where they live.”

Livestock

Mainstream financial services providers have partnered with Fincheck to present their product offerings on the portal, as have newer financial services companies. Bowren says they will soon be including livestock investments into the investment product range for people to compare livestock investing with other investments options.

Stokvels and funeral policies

According to Old Mutual’s latest Savings and Investment Monitor released earlier this month, informal savings vehicles and funeral policies are the most popular savings and investment vehicles used by South Africans.

Bowren says, “Consumers must make sure that they are getting the best possible return on their money over time, and that the administrators or managers of these savings vehicles are legitimate.”

* Adapted from a press release

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