Savings or Forex Account?

[knup]

hi there! i’m (19F) saving up to travel for a few months once i graduate (2025/2026). i’m currently earning about 6-7k p/m. would it be best to put my money in a savings account (about 5 - 8% interest) or a forex account since the rand is getting weaker? if i should do a forex account, what’s the best way to go about it? thanks in advance!

 

[truthseeker52]

@knup The rand is getting weaker for now. Just find any interest bearing account with low fees. Capitec is good for this otherwise the fees eat at your savings.

Side note, Capitec has the lowest international swiping charges in the country at R3.50 flat fee for swiping, meanwhile most other banks use 2/2.5/3% as their exchange fee.

 

[knup]

@truthseeker52 i do bank with capitec already

 

[alfiano]

@knup If you are risk averse and you want to lock-in the exchange rate, then sure, convert to dollars or whatever currency you’re travelling in.

The rand is not necessarily getting weaker, it’s mostly depreciating due to interest rate/inflation differentials. Yes, it has weakened in the past, but it could very well strengthen from now to 2025/26. Not worth speculating on. You also won’t be able to access worthwhile interest rates on foreign currency.

Rather just put your savings into a high-yield account. I’d highly recommend going EasyEquities, NinetyOne Diversified Income H. It’s yielding >10%. Gives you 1% above the very best money market with minimal risk of any capital loss over periods of a year and a half.

My 2c: don’t give in to fear and incur unnecessary forex costs and losing out on an interest bearing account. EasyEquities and a Capitec card when you travel will most likely leave you best off.

 

[knup]

@alfiano thank you, i’ll look into that do you mind if i dm you if i have questions ?

 

[alfiano]

@knup Go ahead

 

[renaissance]

@knup Look up the Shyft app from Standard Bank - Has different forex wallets, easy to use and you can have virtual cards or order physical cards.

I use it extensively for travel and have never found better rates when i buy Euro or UK pounds.

Very simple to use - transfer ZAR into your ZAR wallet and then buy whatever forex you need in the app which transfers to that forex wallet - From there you topup you card to use for purchases

The best part for security - you only keep what you need on the card and top it up when required - if you are not using the card you can move the funds back to the wallet.

 

[knup]

@renaissance thank you! a few people have mentioned shyft so i’ll look into that

 

[jctvcbn]

@knup Definitely savings. Forex is basically gambling and you most likely will break even or lose some percentage to fees.

 

[mduce]

@knup Forex account. You never know what the rate will do, but historically, it will probably be weaker than it is now. Buying now is a good way to peg your spending money now.

As for what to use. I use Shyft. While it is a standard bank product, you don't need to bank with them to get it. It is a 100% app based system. When you set it up, you can immediately send funds over and transfer them in to 4 different currencies. You can then order a physical card to spend that money overseas. While I have not done this part myself, my boss has, and he had no issues using it.

 

[resjudicata]

@knup As you are saving consistently (once per month) I think you will get a good average over time. Shyft, followed by RMB/FNB global accounts are probably my top picks.

Lets assume you do not go forex and you go high interest account -

Saving 6000 per month, you will have 3000 in interest give or take.

The question is do you want to take the exchange risk later or spread the risk over 12 periods.

 

[knup]

@resjudicata i’m leaning more towards a savings account, i’m not sure the risk will be worth it

 

[resjudicata]

@knup Read up on dollar cost averaging might help you decide what makes sense.

 

[resjudicata]

@knup 19 and you're saving 6/7K pm? What is it that you do

 

[truthseeker52]

@resjudicata They're earning 6 to 7k, not saving it. If they're saving that they undoubtedly have help from their parents or are earning a stupid salary whilst studying.

 

[resjudicata]

@truthseeker52 Ohhh my bad. Still that's pretty impressive for someone still in uni.

 

[knup]

@resjudicata i’m fortunate enough in that my parents still pay my bills so any money i make is mine do what i want with

 

[georgiagurl01]

@knup You should consider the potential returns from the savings account versus the potential currency exchange rate gains or losses if you decide to convert your cash into foreign currency. Here are some of the steps you might want to consider following (please note this is not financial advice. This is just how I would perhaps approach this situation):

1. Calculate the savings account interest:
   As the title suggests, calculate the interest earned from the savings account using the appropriate interest rates for each period.
2. Estimate the currency exchange rate changes:
   You can research or make assumptions about the expected movement of the exchange rate between the ZAR and the foreign currency during your saving period. Remember to consider economic indicators, political events, and any other factors that might influence exchange rates.
3. Calculate potential forex account returns:
   Estimate the value of foreign currency you could purchase each month with your savings based on the assumed exchange rate and consider any transaction fees or costs associated with the currency exchange.
4. Compare your returns:
   Compare the total returns from the local savings account with the total value of foreign currency acquired through a forex account, taking into account not just the interest earned but also the potential exchange rate gains or losses.
5. Consider your risk tolerance:
   Risk tolerance differs from person-to-person. If you're more risk-averse, you may want to prioritise the stable returns from the savings account. If you're more risk-tolerant and can stomach the potential volatility, you might be willing to take a chance on currency exchange for potentially higher returns.
6. Make an informed decision:
   Once you've done your homework, you can make an informed decision about whether to keep your funds in a local savings account or convert them into forex. Remember that it is crucial to consider both the potential returns and the associated risks.
7. Monitor and adjust:
   Throughout your saving period, you may want to monitor the actual exchange rates and economic conditions and adjust your strategy based on changing circumstances. Your options involve both interest rate differentials and currency exchange rate movements, and both factors can be influenced by various economic and geopolitical events. The key here is to make an informed decision based on the available information as well as your risk preferences.

 

[lovedaisies]

@knup Download Shyft app - backed by Standard Bank - and start saving in USD or EUR, depending on where you're going. You can create virtual cards, or have a physical (Mastercard) card delivered. Then you can spend directly in forex when you're overseas.