You can open a simple savings account with an initial deposit of just R10. But, while this is generally a safe place to keep your money the interest you receive is negligible and rarely keeps up with inflation. You could use a savings account for a short-term objective like paying for a holiday, or buying new furniture.

A fixed deposit involves lodging a lump sum with your bank for a fixed period of time, usually from 3-months to 1-year. The rate of interest is higher than that of a normal savings account. Here the rule of thumb is the longer the fixed term, the better the rate you will receive. However, this is not always the case. If economists believe that rates are in a downward trend they may reduce the rate for a longer-term investment.

The 32-day call period means that the investor has to give the bank 32 days notice before they withdraw their funds. The minimum investment varies from bank to bank but the norm is R1 000. If you withdraw your money sooner a hefty penalty of around 16 percent is levied on your money. So, at all costs, avoid withdrawing this money on short notice.

The money market account is an entirely different breed of animal. Your money is invested in a mix of short-term debt instruments such as Treasury bills, bankers? acceptances, negotiable certificates of deposit and savings products. They offer better returns because they pay participants the full earnings of the fund less a fee. There is usually a minimum investment required of R25 000 although you can invest via Money Market Unit Trusts.

Whilst there is always a place for a cash element within an investors portfolio a lot of people are placing too much of their savings into these theoretical safer options. After tax, it is rare for any of these short-term savings options to beat inflation.

It is important for you to understand that ?investment risk? is the potential for growth in value of your assets to under-perform inflation over the short, medium or long term. Over the short-term JSE listed shares can under perform inflation. Over the medium term this does not often happen (the last time being 1969 to 1973). Over the long term this has not happened in the last 100 years.

The conclusion is that everyone, including retirees, should have a mix of equities, bonds, property and money market or fixed deposits in their portfolio. The mix depends on the number of years you have left until retirement and you really should review that mix each year.

If you have any questions or comments you can email me on ionam@702.co.za