Most people have some form of bank savings account. Because of their simplicity and familiarity, a large portion of the public’s savings is tied up in bank investments of one type or another.
There are different types of bank investments, and below are examples of a few.
- Call Accounts Almost every bank offers some type of call account. With these accounts the investor’s money is on call, which means it can be withdrawn at very short notice (usually not more than 24 hours). Interest rates fluctuate while the investor’s money is invested.
- Fixed Deposits With fixed deposits, the investor’s money is tied up for a pre-specified term, usually ranging from one month to five years. Although interest rates are usually fixed at a pre-determined rate for the full term, some banks are now offering linked deposits, where interest rates can increase during the term, but has a guaranteed minimum. Interest rates on these deposits are generally higher than those on call deposits, and the longer the term the higher the interest rate.
- Notice Deposits With notice deposits, an investor’s money is invested indefinitely and only becomes available after a pre-specified notice period (eg.32 days) has been served. Interest rates on such investments are generally higher than for call deposits, and the longer the notice period, the higher the interest rate.
Bank investments have minimum investment amounts that vary from institution to institution, but entry levels are generally low compared with alternate investments. However, interest rates differ quite substantially for different amounts – the larger the amount deposited the higher the rate.
There is very little risk of an investor not getting their capital back from the bank. Banks in SA are well regulated, and there is very little chance of an investor losing their money.