The ultimate guide to your finances

Meerkat's guide to your finances

It’s always good to learn about finances. Here we provide a guide to your finances. The basics of budgeting, credit, banking, saving and debt are the pillars you need to focus on to not only improve your financial education but you will be able to apply what you learn to make your finances great.  

Bank accounts: Everything you need to know 

Bank accounts are normally one of the first accounts you open as you need them to store your money, pay for things online or pay someone else for their services. A bank account is the foundation for a good financial future.  

You may be wondering why you need a bank account...here are some key reasons why you need to open your own bank account:  

• Use of a debit or credit card  
• Store your money  
• Bank transfers are safer than storing cash  
• Online payments and payment apps 
• ATM use  
• Earning interest on your savings  
• Proof of payment for things such as renting a home  
• Receiving an income from an employer  

These are just a few key points as to why having a bank account is so important. There are also many types of bank accounts you can open; you can choose the type that best suits your needs.   

Savings account  

This type of account is great for holding money that you don’t need in your cheque account. It normally earns interest on the money you put into the account and it’s a great vehicle for building up an emergency fund. Take a look at Meerkats new savings solution where there are no withdrawal limitations, you can priorities your goals and start saving from as little as R25 a month.  

Cheque account 

This is a liquid account and allows you to make multiple withdrawals and deposits. Money can be deposited by an ATM, direct deposit or bank transfer.  While withdrawals can be made through ATM’s, cheques or a debit card.  

High-yield savings account  

This account is usually for long-term savings. The more you invest and the longer your money is in the account, the more interest you earn. If you have long term goals our new savings plan will allocate your money into the right vehicle.  

Emergency fund  

Many people know what an emergency fund is but don’t get to starting one. An emergency fund is important to build up resilience when life happens. When you find yourself in a financial emergency, having these funds available means you do not need to turn to debt to get through it. Ideally, your emergency account should hold 3-6 months' worth of expenses, but the most important thing is to just start.  

Credit cards  

A credit card allows you to borrow money from a credit provider. Because the money that you use isn’t yours, you owe the credit provider the money you borrow plus interest. You need to take the interest rate on your credit card into consideration when taking out your credit card. It is easy to forget about the interest rate and then borrow money and suddenly be thousands of rand in debt.  

If you use your credit card sensibly it has a positive impact on your credit score. If you pay the balance in full every month you are a low-risk client and are more likely to be approved for car finance or a bond. You can also benefit from many rewards programs that are linked to credit cards, just be a sensible user.  

Budget 

Creating a budget is the most effective way to manage your finances. You can track your income and expenses and see where your money goes every month. This way you can see where you can spend less each month and put that extra cash away into a savings account or towards your emergency fund.  

How do you create a budget? The easiest way to create a budget is to first list your incomes and expenses and then deduct your expenses from your income. Now you will be able to see how much money is left over and allocate some of it to savings each month. For more on how to create a budget click here.  

Start investing  

Many people think about risk when investing but there is also great reward over the long term. Now is a great time to start investing in South Africa. Although our economy is going through a tough time and a very big fall in our stock markets, the repo rate has been cut by 100 basis points and left at 4.25%. Assets are cheaper than usual and so are stocks, so why not get into the market now?  

What can I invest in?  

What to invest in is an ongoing question posed when it comes to investing your money and it all depends on how much money you are willing to spend, how much you are willing to buy and the amount of risk you are willing to take.  

Stocks 

Stocks can be considered as ownership in the issuing company, they are also called shares or equity.  This basically means that you own a small percentage of the company's earnings and assets. Owning stock gives you the right to vote in the shareholder meetings, receive a percentage of their income called dividends and sell shares to other people. Shares prices fluctuate depending on many factors including the company's performance. This type of investing can be considered risky but can reap rewards.  

ETFs (Exchange Traded funds)

An ETF involves security with a collection of securities inside (such as stock). This type of investing allows you to purchase many securities at once or with one purchase. Although they are only one purchase, they include many securities or stocks. They are listed as ETF's on the JSE. This type of investing is considered less risky as some of the stocks could lose value, but others could retain value.  

Mutual funds  

A mutual fund is an investment vehicle managed by an investment manager. They use pooled money from multiple investors. The shares in this type of investment are calculated by shares representing each person's stake. They also provide exposure for stock, bonds and other commodities.  

Bonds  

Bonds are issued by governments, states and companies (among others) to finance specific operations or projects. When a person buys a bond, they are simply loaning their money to the bond issuer with the promise of repayment with interest. When interest rates fall then bond prices rise Higher rated bonds are classified as less risky. 

Why not start investing in Meerkats savings plan, just tell us your goals and let our super-smart Meerkat, Moku choose the right vehicle for you. These are just a few tips to get you started, if you would like more detail on any topics, leave us a comment below!