Vanesh asks: For my emergency fund should I save in a money market investment account like Nedbank JustInvest, or a money market fund like Allan Gray Money Market?
Maya replies: Both options are valid for an emergency fund. Have a look at the relative interest rates and make sure that there are no upfront fees payable on a unit trust money market option. However, you also need to consider what best suits your needs.
I often get asked by readers for a bank account with the best interest rate — however there are other factors to consider, like convenience.
If you are opening an account with another institution for 1% or 2% more a year, you need to decide if it is worth the hassle factor.
For a short-term savings goal, or an account to house your provisional tax or VAT for example, it can be more convenient to open an account with the same bank you bank with, especially given the whole Fica process.
If you are saving for a goal in six months’ time, the time and effort to open a savings account with another institution is probably not worth the additional interest.
If, however, you have a lump sum that you will be keeping as an emergency fund that you will hopefully not need for a long periods of time, it is worth shopping around for higher interest. Also, the fact that the money is not that accessible will prevent you from tapping into it for non-emergencies.
That said, unless you have a credit card that you can use in an emergency, it may be a good idea to keep some funds in a call account linked to your bank account, which can be a life saver if you need the funds urgently
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