A Fin24 user writes:
I intend to have a white wedding in December 2012. However, I have no idea how I can save for this.
My husband (who I'm customarily married to) takes care of all our bills, so it would be selfish of me to ask him to save for the wedding too as he has no extra income. The money for this would therefore have to come from the income I earn.
Please could you suggest roughly the amount(s) that I would need to save to achieve a goal of R50 000?
Lynton Welby-Solomon, a certified financial planner with PSG Konsult, responds:
The Fin24 user has 18 months in which to save some of her income every month in order to have R50 000 by December 2012.
I would assume that she would need a high degree of security and the investment would need to be liquid within 18 months. I would also need to look at the costs and tax implications of the investment, as these all impact on returns.
Given the short time horizon, we would not advise equities. The current market volatility makes it difficult to anticipate market return over the next 18 months.
I would therefore recommend a monthly debit order into a money market fund. The interest earned on this investment will be below the minimum threshold, so there would be no tax implication for the client.
The costs and risks associated with this investment would also be relatively low and, given the benign interest rate environment, the yields on these should remain stable in the short term, with most economists expecting a slight increase in rates towards the end of the year or the beginning of next year.
Currently, the rates being offered by banks like Capitec and Investec are between 4% and 4.75% per annum after costs. If we assume that the client will get a yield of 4.5% compounded monthly, she would need to invest R2 700 per month in order to meet her goal of R50 000 by December 2012.