I heard an advert on the radio last night for Nedbank’s new “Park-it Limited Edition Investment account”…seems that if you give them R10000, they will give you up to 6.25%* interest per annum and after the first 14 days you can have access to your funds with 24 hour notice. There are at least 2 problems with this…
- “Up to” 6.25% (turns out you need to invest R1million to get this rate – R10000 gets you 5.75% – the small print says that the rate will be tiered according to the balance.
- You cant access the funds for the first 14 days.
Now while this may not be a problem to anyone not needing the funds urgenlty, it is certainly a problem to anyone thinking of using this as an emergency fund. To my mind, there are far better options both for emergency fund money and also for those looking for high interest accounts.
For emergency money you are going to struggle to beat a money market unit trust account – no fees to get in or out, instant access (24 hour notice on most), the best interest rates and most importantly of all, safety! The historic yield on a money market unit trust fund is ±7-7.5% but dont expect this going forward – rates have fallen and it is more likely to be ±6.5% for the next 12 months. (Minimum investment amounts are not as high as the banks would have you believe and there is even a money market unit trust that will take a R1000 debit order.)
There is also Capitec Bank which is offering an incredible 7% on daily savings accounts – this is an awesome rate and an excellent alternate to the unit trust but only for the first R10000 (the rate falls after that)!
Longer term investors looking for high interest rates should consider the RSA Retail Bond – this is a government guaranteed bond with 2, 3 or 5 year options. The 2 year option is currently 8.5% and on all of them you are locked in at that rate for at least 1 year – thereafter, if rates have increased you will be able to increase the rate on your bond for the remaining period as well. If rates fall your rate stays fixed! No fees to get in and interest can be paid monthly!
As a rule, my advice is to stay far away from banks when looking for interest bearing investments – they are there to make as much money from you as they can – there are far better options than the traditional banks!