I was in the bank recently and while I was waiting in the queue I was gob-smacked by how many people (mostly elderly) were making withdrawals or giving notice on their 32 day notice accounts.
Consider the good (old fashioned) 32 day notice account: Your money is locked away for at least 32 days…in the hope that you are going to get a decent interest rate. Think again. The “big four” banks are currently offering the following interest rates on an investment of less than R10000:
Why would anyone make use of such an account when you can get more than 7.5% from a money market unit trust account where there is no upfront fee and you can access all the money at 48 hour notice? And how can anyone at the bank actually advise clients to still make use of these accounts?
This is another offering from Std Bank that gets a big thumbs down from us. The radio ad sounds promising:
• Access up to 40% at any time
• Great interest rate of up to 7.4%
However, you only get 7.4% on an investment of R5m or more that you are prepared to invest for at least 12 months (you would have to be crazy to do this)! For most of us the interest rate would be closer to 6% pa.
And while you can access up to 40% of your investment amount before the term expires, you will be penalised if you want to access more.
So why would you invest your money into an account with a low interest rate and a penalty to access your funds when you could be getting ±8% on a money market unit trust account with full access to your funds within 48 hours and no penalties?
Despite all the money that the banks spend advertising their savings products and all the claims to have no fees or commissions, I would not put a cent into any of their money market or savings products. If you want a money market account then you need to use a unit trust money market fund. They are safer, more transparent (cheaper) and give better returns than the bank money market accounts:
Safer – the money is held in a trust and you own units in the trust (remember Saambou or African Bank?)
Better returns – the fund generally invests billions and is able to secure a better rate than your single investment at the bank
Transparent/Cheaper – each fund publishes its annual fee and these range from 0.25% to about 0.5%. As a rule, the lower the fee, the better the return you will receive.
Expected return – currently 8%+ pa (after fees)
Unfortunately, most unit trust money market accounts want big initial deposits and/or very high monthly debit orders…but not the Gryphon Money Market Unit Trust Fund. They accept an initial investment of just R2000 or a R200 debit order and on that amount you will receive the same interest as someone who invests R1m. That’s the beauty of a unit trust account!
You can read more about the fund on their website and can also find the application there http://www.gryphonam.co.za/Gryphon/portfolio/the-gryphon-money-market-fund/
Below are a few of the facts about the fund…happy saving.
||Short term Fixed Interest Index (STEFI)
|Charges (Incl. VAT):
Annual Management Fee 0.29%
|Minimum lump sum:
|Minimum debit order:
For the record – they also have some other great funds.