Reader asks: I contribute R1 000 a month to what is like a stockvel that I have formed with a few friends of mine. But we need to change the method; we need to invest this money instead of just giving it to one person every month.
We need to invest the money as from next February until November 2010. At the moment five of us belong to the group, so we will be putting in R5 000 a month. Please advise us on how to invest in this kind of situation.
Maya replies: As this is a short-term investment your best option is a bank account. There are many bank accounts that provide for collective savings, but the important thing to remember is that the longer you leave the money in the account, the higher the interest rates. If you can opt for a fixed deposit or notice account you will receive about 4% more interest than a call account.
Nedbank
Nedbank’s offering is probably the most attractive as it does not have any fees. Club Account, Money-24 and NedTerm all offer no fees and attractive rates — and they’re available to groups of people.
The products require three signatories to open the account, of which two are required to withdraw money or place notice. Nedbank, however, says it is flexible and the group would able to choose its requirements for transacting, provided it meets or exceeds the pre-mentioned minimums.
All signatories will require verification in terms of Fica (ID and proof of residence), irrespective of the product choice.
Club Account is operated by means of a book, and withdrawals/deposits can be done at any time at the branch.
Money-24 is a money market account requiring a minimum balance of R10 000, additional deposits can be done at the branch subject to a minimum of R1 000, and one day’s notice is required to take out funds (also a minimum of R1 000). The minimum balance is not a hard rule, it just means you will not receive interest until the R10 000 minimum is reached.
NedTerm sounds like the best option for you. It is a notice deposit with a minimum deposit of R1 000, additional deposits of R100 and no minimum withdrawal amount, which is also subject to one day’s notice.
Both Money-24 and NedTerm offer the best interest rates with a R10 000 deposit earning about 6,5% (although this will fluctuate with interest rates).
ABSA
The Absa Club account is a collective saving for an “informal body” with immediate access to funds. This “informal body” may take the form of a “society”, savings club, church group, social club, sports club, stokvels, burial societies et cetera. A minimum of two signatories is required to open an account. A minimum of two signatories is required for withdrawals from the account.
Other requirements include:
- Minimum opening balance: R500;
- Maximum Balance: Unlimited;
- Deposit: A minimum monthly deposit of R250 is required;
- Interest: Interest is fairly low. Currently 2,7% on R10 000; and
- Fees: If the balance is below R10 000, the client will pay an administration fee.
Monthly lucky draws on Absa Club accounts: The monthly lucky draws are introduced to encourage higher balances on the Absa Club account and cash prizes totalling R10 000 a month can be won.
If you do not need to access your funds immediately you can opt for Absa’s 32-day notice deposit or fixed deposit. For example a six-month fixed deposit is currently paying 6,5%.
What you need to open a collective account:
- The bank will only identify and verify the members designated to open the account and to transact on the account;
- Only valid South African identity documents (that is, green bar-coded ID books) may be accepted as the identification medium;
- Proof of residential address; and
- A copy of the society’s constitution. If one does not exist in writing, a written declaration (obtained in the branch) is required. The declaration must be furnished by all the mandated officials authorised to establish a business relationship on behalf of the entity.