Bank like a banker
Financial experts tend to be well versed in the art of shrewd money management, but there’s no reason why you can’t enjoy the same benefits. Here are 10 tips from experts.
In the following paragraph we’ll be asking you three questions. Please answer each with either ‘yes’ or ‘no’.
- When you set out to buy new shoes, do you generally tend to browse and compare the options at different stores before making a purchase?
- When you buy a new car, do you compare the costs of various models before taking the plunge?
- When you order food at a restaurant, do you check the price of a meal first before telling the waitress what you want?
By the way, do you apply the same principles when banking? Whatever your answers were above, the principle stays the same. Banking is part of your monthly expenses and it is only by comparing costs and shopping around for the best deals that you will really be able to save on those nagging fees.
Here are ten tips to get you started:
- If you own a business for which you need a credit card machine, make sure you have the best possible deal. According to Suzette van Niekerk of Exceed Asset Management, you can halve your monthly fees by being smart about your choice. “Bear in mind that a monthly rental fee comes into play, that there is a contract fee and that you also pay an amount (up to 5%) on every transaction. These costs differ from bank to bank, so compare prices before committing to one.” Many businesses pass bank fees on to their clients. This can be avoided or reduced by getting the best possible deal. “Whether you run a guesthouse or own a panel-beating shop, you can save a lot and also offer your clients the best possible service with some shrewd planning,” said Van Niekerk.
- It doesn’t matter whether you’re a dab hand with the internet or not, it’s definitely worth your while to start using online banking as you can save on a variety of transactions. Van Niekerk cited the following example: “An internet transfer is often far cheaper than making a deposit at the nearest branch of your bank, and also a lot more affordable than paying by cheque”. She added that cash is not necessarily king either – fees are charged when drawing money and when paying it into an account. One online transfer could streamline the process without costing an arm and a leg.
- Debit orders are simple and easy as they allow you to forget about paperwork and payments and ensure that payments are made on time. However, different banks charge different amounts for debit orders, so find out what you are currently paying and start comparing it with the fees of other banks.
- Save, save, save! It’s the first thing any banker will advise you to do, even when times are tough. Actually, financial experts strongly recommend saving especially when times are tough. “The fact that the world is emerging from the economic downturn is good news. But most of us have had it tough financially and would welcome a breather,” said Sugendhree Reddy, director of banking products at Standard Bank. She added that a good way to free money to clear debt – and hopefully eventually save – is to re-examine your insurance policies. “You’re probably still paying premiums on assets you no longer have or you’re insured for more than the market value of your car. Once you’ve adjusted the premiums, use the money you’ve saved to either bolster your savings account or pay off debt. And just keeping working towards having more savings than debt,” she said.
- If you’re a pensioner, be sure to investigate the perks available to you and insist on making use of them. Many banks offer incentives such as low or no fees on certain fixed amounts in a bank account, and it’s a good idea to find out whether your bank adjusts these numbers when interest rates go up or down.
- Make sure you understand the difference between the various types of accounts. “Many people still don’t understand that you do not earn interest on money in a cheque account. When it comes to funds that are not part of your monthly deductions, it would be far better to put it in a savings or money market account,” advised Van Niekerk.
- To support your medium-term goals like buying a car or putting a deposit down on a property, it’s a good idea to put your money into either a fixed deposit or a money market call account. “A fixed deposit gives you a good interest rate and you have to give notice when you want to take your money out. This makes it ideal for medium-term savings,” said Reddy, adding that, “A money market account can have an even higher rate, but it still allows you to access your money quickly. This is a good option for saving, but you have to be honest with yourself about how disciplined you will be about leaving your savings to mature.”
- Be vigilant when you open new accounts and, even though it may seem boring, take the time to read the fine print. “Often fees are involved, e.g. starting fees and ongoing fees on accounts like a money market account. These are collected automatically,” said Van Niekerk. If you’re unsure, ask your banker to explain in detail which fees are relevant and which will be directly deducted. Then make an informed decision about whether the account is worth your while.
- When you draw cash from an ATM, do you know what the charge is for every withdrawal? You may think you’re saving money by drawing (and subsequently spending) only small amounts at a time, but once you’ve considered that you pay anything from R5 to R11 per withdrawal, it makes sense to rather draw one larger amount instead of several small amounts. However, things do get more complicated the more you draw, and at some banks the charges for drawing R600 can be double that of drawing R500. Which is just yet another incentive to spend some time finding out exactly what deal your bank is offering you, and what every single transaction – even an ATM withdrawal – costs.
- Help your kids become shrewd money managers. “The lessons of money management are best learnt when young,” commented Reddy. Most banks accommodate youngsters and their specific banking needs, allowing them to graduate from piggy-bank savings to formal banking, e.g. Standard Bank’s Sum1 account. Having an account teaches children the basics of doing transactions via an electronic account, which involve little or no banking fees. It’s also a great way to teach children about savings. Seeing how they earn even small amounts of interest can be a huge incentive for smart money management.
Article adapted from the original by Riekie Human in cooperation with Suzette van Niekerk, for RCS Lifestyle, March 2011.
For more information, please contact Suzette van Niekerk, Exceed Asset Management, tel. 021 852 0382 or e-mail firstname.lastname@example.org