A Fin24 user is looking for a way to save, yet have access to the money in case he needs it. He writes:
I am 62-years old and want to save a fixed amount monthly. The savings must be accessible in an emergency.
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Sinenhlanhla Nzama, actuarial manager at Old Mutual responds:
Given the very few details provided, it is very important to encourage you to consult a qualified financial adviser.
An adviser will look into your current circumstances and your financial needs, including the need for accessible savings.
Accessible savings in case of emergencies form the base of a financial plan. These savings should ideally be invested in such a way that you can be able to withdraw a portion, without paying further charges or penalties.
Generally you would look into investing your savings in money market type of unit trusts. As of March 1 2015, you will be able to also consider investing your savings into the tax free savings plans.
Your money in such savings plans will be accessible without penalties. Most importantly, all the investment growth you get will not be taxed.
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If you are closer to retirement, it may be worth also boosting your retirement savings. Both the unit trusts and the tax free savings plans can be used to boost your savings for retirement, while your money still remains accessible.
The key would be the levels of liquidity required, especially in case of an emergency as mentioned in the question.
Although a retirement annuity (RA) can be accessed at any stage after the age of 55, the amount available could be limited to a third of the value at the time, depending on the investment size.
On the other hand, the RA not only serves as a retirement capital booster, but also allows the investor to enjoy tax relief on the contributions within certain limits.
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