South Africans are urged to save their spare cash after interest rate cuts

Following yesterday's decision by the SA Reserve Bank Monetary Policy Committee to reduce the repo rate, First National Bank (FNB) has appealed to all South Africans to save the spare cash they stand to gain.

“We welcome the interest rate reduction by the Reserve Bank and we would like to urge South Africans, both rich and poor not to use the spare cash on frivolous spending, but to save it,” says Ilse Smuts, Core Banking Solutions Head of Marketing.

Smuts says growing your savings has now become more critical because of the tough economic times we live in. The prevailing economic environment is spurred by the global economic slowdown, which has been fuelled by the credit crunch in the United States.

Says Smuts, “The current economic circumstances have made savings a necessity. It is in times of uncertainty that people should build their savings, which will provide them with added financial security.”

South Africa still has relatively high interest rates, and this coupled with the persistently high food prices, have meant that many households’ disposable income has shrunk and thereby removing any opportunity to save.

But, today the Reserve Bank gave borrowers some respite when it reduced the repo rate by 100 basis points, which will result in a drop in prime rate from 14% to 13%.

The latest cut implies a decline in a prime rate instalment repayment (monthly compounded) of R366 per month on a R500 000 over 20 year bond, and R732 reduction on a R1 million bond, also over 20 years.

For an example, if Mr. Jones who owns a R500 000 house decides to save his instalment savings of R366 per month, over 12 months he could accumulate R4 392 (without interest).

Where does one save this amount?

The FNB Savings Pocket is linked to your FNB Personal Cheque Account. Transfers between your Cheque Account and the Savings Pocket are free of charge and customers can transfer the money as often as they want using various methods such as ATM, FNB Online or Cellphone Banking.

Customers cannot withdraw cash directly out of the Savings Pocket account. The Savings Pocket pays competitive interest rates and helps the customers to save by keeping funds separate from funds used daily.

“Since this option has been launched to our customer there has been a fantastic take up. Half of all new Personal Cheque Account clients also deposit money into a linked Savings Pocket, so this innovation practically helps South Africans save,” concludes Smuts.