How to Choose the Best Savings Account for You

a couple considers savings accounts options to find the best one in South Africa

 

Saving your money is easier with some banks than with others, with interest rates and bank fees affecting how fast your savings grow. Here’s what to look for when comparing savings accounts to ensure you get what best suits your needs.

 

South African banks offer attractive savings accounts, which are great for building your money at minimum monthly costs and earning a little interest, which will help preserve the value of your money while still giving you easy access to those funds.

 

That’s basically the goal of a savings account, says Certified Financial Planner Gerald Mwandiambira. “A savings account is essentially a vehicle where short-term funds are stored but with easy access should you need them,” he says. “Accessibility, together with the rate of  interest that can be earned, are therefore top of mind when you’re selecting an account.”

 

The shorter term the account, the lower the interest you’ll get. The reason is simple: “Typically, the bank takes the money you deposit and uses it to invest or lend to other people,” Mwandiambira explains. “If your money is ‘on call’ at any time, it limits the bank’s options of where it can use that money.”

 

Why bank fees are the enemy of saving

 

“Bank charges impact on savings and must also be considered,” Mwandiambira warns. “Hidden charges are often deposit and withdrawal fees, especially where an account requires you visit a branch to transact. Cash-handling fees are very high, which is not consistent with why most reasonable people use a bank!”

 

Any fees on any transactional account – especially a savings account – should be avoided. “By shopping around, you’ll find savings accounts with no fees or low fees,” he says. “But read the fine print. Often these accounts have other transaction fees that can make the account very expensive.”

 

What a savings account actually does

 

South Africans have a wide range of options when it comes to savings accounts, from Absa’s TruSave and Standard Bank’s PureSave to Nedbank’s Savvy Plus, FNB’s Easy Account and Capitec’s Global One. No matter which one you choose, make sure you’re choosing it for the right reasons. A savings account should be for savings, it is not an investment tool.

 

“The two are different,” says Mwandiambira. “When you save, your clear objectives are accessibility, safety of funds and short-term use. Things like capital appreciation and income are not savings goals, but rather investment goals. When you invest, your goals are growth, security and income, with a longer-term view point and no requirement for short-term access. Confusion between these two sets of objectives often leads people down the wrong path.”

 

Beware inflation

 

Your savings account, then, should either be an emergency fund or one where you’re saving towards a specific short-term goal with a fixed end date. “You’ll often need the money in your savings account in an emergency, or before the annual interest rate cycle is completed,” says Mwandiambira. “Interest paid in these accounts is therefore low.”

 

No kidding. Absa’s entry-level TruSave savings account promises 0.45% interest for balances over R50, while on the FNB Easy Account interest is pegged at 2% for balances up to R19,999, going up in increments to R3.05% for balances over R100,000. In 2019 the inflation rate was 4.13%. 

 

Do the maths: if your savings account is giving you 2% interest while inflation is 4%, your money is actually worth less and less every month. (By September 2020 the interest rate had dropped to 3.0%. That’s better, but you’re still losing.)

 

“If money is maintained in a savings account, it will often result in losses due to inflation,” says Mwandiambira. “So don’t use a savings account if the intended purpose is actually long-term investing. I would recommend a chat with a financial-planning professional to ensure that you’re making the correct choices to suit your purpose and financial position.”

 

Now that you know what to look out for, here are some of South Africa’s most popular savings accounts, across the Big Five banks. Compare which ones will work for you, and use Hippo’s online tool to get the best quotes for your needs

 

Absa TruSave

 

Absa’s entry-level savings account promises 0.45% interest for balances over R50 (which also happens to be the minimum you need to open the account). There’s no monthly admin fee, so you only pay for transactions. Free stuff includes two Absa ATM cash deposits, two Absa ATM mini statements and two Absa ATM balance enquiries a month, as well as two Absa ATM cash withdrawals per year.

 

Monthly administration fee

Free

Withdrawal at Absa ATM

R2 per R100 

Withdrawal at Absa branch

R75 + R2.10 per R100 

Cheque deposit: branch counter

R60 

Withdrawal at Saswitch ATM

R14.50 + R2 per R100 

Transfer between your own accounts

Online: free

SMS: free

ATM: free

Branch teller: R75 

Debit order (internal & external)

Free

 

Stop order

Free

 

Nedbank Savvy Plus

 

Nebank’s popular savings account is handy for people who save a lot, and bank a little. Here’s what we mean: while you get unlimited deposits at cash-accepting Nedbank ATMs, you get four monthly withdrawals at Nedbank ATMs. You’ll need to earn a minimum monthly income of R3,000 to open the account, and you can then add benefits (an overdraft facility, for example) as you need them. Good luck trying to find out what interest they offer, though.

 

Monthly account maintenance fee

R115 

Withdrawal at Nedbank ATM

R2 per R100 

Withdrawal at Nedbank branch

R75 + R2 per R100 

Cheque deposit

R75 + R2 per R100 in addition to cheque service fee (R150)

Withdrawal at another bank’s ATM

R10 + R2 per R100 

Transfer between your own Nedbank accounts

Online: free

SMS: free

ATM: free

Branch teller: R80 

Debit order (internal & external)

Free

 

Stop order

Free

 

FNB Easy Account

 

FNB’s Easy Smart Option offers more than just banking – it comes with free data, voice minutes and SMSs (depending on your reward level), along with free medical, legal and financial advice via their helpline. The annual interest is pegged at 2% for balances up to R19,999, and it goes up in increments from there, ending at R3.05% for balances over R100,000.

 

Monthly fees

R59

Withdrawal at ATM

R2,000 free per month, thereafter R2 per R100 

Cash withdrawal at branch

R80 + R2.50 per R100 

Cheque deposit

R60 + R11 per cheque (Max. R150 )

Other banks ATM cash withdrawals

R10 + R2 per R100 

Inter-account transfer

Online: free

Debit order

Internal: free

External: 10 free per month, thereafter R7 

 

 

Standard Bank PureSave

With interest rates of up to 1.35% and a minimum opening deposit of R50, Standard Bank’s PureSave savings account helps you get into the habit of putting away money regularly. There are no limits on extra deposits or savings periods, and the interest is calculated daily (based on your account balance) and paid out monthly.

 

Monthly fees

None

Withdrawal at ATM

R2.20 per R100 or part thereof

Cash withdrawal at branch

R55 + R2.20 per R100  or part thereof

Cheque deposit

R55 at ATM or branch

Other banks ATM cash withdrawals

R9 + R2.20 per R100  or part thereof

Inter-account transfer

ATM: R5.50

Online: R5.50

Branch: R65 

Debit order

Internal: R5.50

External: R18 

 

Stop order

(Alternative to stop orders: set up daily, weekly or monthly scheduled payments on internet banking or the app for free.)

Internal: R5.20

External: 7.80

 

Capitec Global One

 

Capitec do things differently, offering a transaction and savings account that provides up to four extra fixed and tax-free savings plans for free. The fees are attractive (by which we mean low, at just R5 a month) and the interest is a nominal 2.25% up to a balance of R99,999, and then 2.5% for balances over R100,000.

 

Monthly fees

Credit Card: R40 

Debit Card: R5 

Withdrawal at ATM

R8 per R1,000 

Cash withdrawal at branch

-

Cheque deposit

Salary Cheque: free

Non-salary Cheque: R70 

Other banks ATM cash withdrawals

R9  per R1,000 

Inter-account transfer

Free

Debit order authentication

App/Internet: R1 

Branch: R7 

Stop order

App/Internet: R1 

Branch: R1 

 

Read more: Our Banking Fees Guide 2020/2021 shows an even bigger comparison of different bank accounts and their fees.

 

This comparison looks at the most-used savings accounts, which are the entry-level ones, from each bank. Of course, your needs may differ, but it is always vital to compare before making your choice. Now that you have an idea of what’s available (and what the bank charges are), use our savings accounts comparison tool to compare products from South Africa’s leading banks side by side.

 

This article is for informational purposes only and should not be construed as financial, legal or medical advice


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