How can I save on my income?
Saving on a small income is possible. By following a few rules you should find that a small amount is available to be put aside at the end of every month.
How do my savings benefit the economy?
Saving for your retirement and other future needs will leave you better off. As well as being good for you personally, your savings also benefit the economy - particularly if you invest your savings productively. Creating prosperity and jobs requires investment. Every factory, shopping mall or engineering project requires investment capital to convert it from an idea into reality. The more South Africans save, the greater the pool of investment capital we create. The more investment capital available, the more potential there is for the economy to grow by creating jobs, for example.
What does the bank do with my money and why do they charge a fee?
After accepting a deposit the bank provides loans to the value of deposits received. They charge the borrowers interest, which belongs to both you and the bank. But today banks also provide a wide range of services to clients. The administration of bank accounts is expensive. Banks charge fees to handle these administration costs. Banks also provide a safe place for your funds, and pay you interest. The service is usually worth the small fee charged, but you should always compare bank fees to ensure that you are paying competitive rates at your bank. If not, you should change banks. Also, at all times you are a customer of your bank and you should feel comfortable about approaching your financial establishment for any explanation about fees and administration.
How are interest rates calculated?
Interest is the amount of money the bank pays into your account for depositing your money with them. The interest payments are calculated as a percentage of funds in the account. This percentage is called the interest rate.
Are there different ways of saving?
There are a number of ways to save money to cover your future needs. These methods include:
Is it not better to buy now and save on increased costs later?
When you save, your returns from your savings are almost always higher than inflation. This means that by buying now you are sacrificing the returns you could have earned above inflation. By buying now you avoid the negative effects of inflation, but also avoid the even larger gains you could get from saving. This includes the benefit of compound interest i.e. saving earlier and earning interest on the interest already earned.
Can buying on credit help me?
Buying on credit helps the banks and the retailers, but it does not help you. When you save or invest, interest works on your behalf. You get paid interest on your savings. However, accepting credit makes interest work against you because you are paying the interest to somebody else. Buying on credit also means that you could be living beyond your means. Should you be forced into a credit situation, it is to your advantage to get out of the situation at the earliest opportunity.
Who created money?
Money replaced barter as a means of exchanging goods and services thousands of years ago. Cattle, grain and cowrie shells were used as the first form of money, replacing the old way of doing things. Bartering did not work because the two people who wanted to sell to each other had to have exactly what the other wanted. Coins, as we know them, were first used in Asia Minor (modern Turkey) about 3000 years ago. Paper money was first used in China about a thousand years ago. Today money is created by the central bank of the country in question.
If saving is so important, why is it taxed?
How does the government save?
Stokvels are community savings clubs. They sometimes also play the role of social clubs and burial clubs. Stokvels also create savings for members through their increased buying and bargaining power. Government has realized that it has to support and encourage informal community-based savings. Consequently legislation has been introduced that deals specifically with stokvels.
Most stokvels work as rotating savings clubs. Members contribute a specified monthly sum to the club, with each of them getting to keep all the contributions when their turn in the rotation arrives. Some stokvels work as funeral clubs and only pay out a specified amount, on the death of a registered beneficiary. They are a good tool for saving, and provide an exciting social environment as well.
How can teenagers save?
Click here to view a few Savings Tips.
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