While the economic impact of Covid-19 is being felt across all sectors of society, senior citizens (55 years and older) who rely on interest earned on savings may be hardest hit by the financial fallout from the pandemic.
The South African Reserve Bank (SARB) has reduced interest rates by 2.75% since January, with likelihood of further cuts. While this is good news for people with debt, those who rely on savings for income may be negatively affected.
According to Himal Parbhoo of FNB Savings and Cash Investments for Retail, there are options that people can consider to lessen the impact of Covid-19 and the associated rate cuts on their finances. Parbhoo recommends a 'hands-on' approach which involves a combination of cost cutting and income maximising strategies.
"When a company faces difficult times, it typically responds by finding ways of trimming its expenses, while proactively looking for opportunities to optimise its income and adapt the way it works to its new business reality. Consumers can take a page out of this book and approach by adopting a similar approach to cope with the financial impact of Covid-19," he says.
Parbhoo says it's also important to thoroughly investigate ways to leverage your relationship with your bank and utilise the solutions it offers to cut costs and maximise income. He cites FNB's Bank Your Change and eBucks offerings as good examples of these solutions of which people should be taking full advantage. "If you save your money and pay using eBucks for shopping, fuel and health supplies, you can steadily grow your savings account balance," he explains, "and if you also specify an amount of money to be automatically transferred to your nominated savings account, via Bank Your Change, every time you use your FNB Cheque Card for a payment, that savings growth can be compounded further."
And this same collaborative approach between client and bank can be a very effective way of maximising income to cushion the Covid-19 financial impact. "FNB's response to supporting its clients through the crisis includes giving consideration to offering seniors truly competitive interest rates on their Fixed Deposits, with the benefit of having the interest paid out monthly to supplement income." He therefore encourages FNB clients with savings or deposit accounts to contact their bankers to discuss their interest options. He notes that clients can also discuss blending their savings products more effectively to maximise both the growth and income components of their cash portfolios, also considering Tax-Free Cash Deposits.
Finally, Parbhoo emphasises that seniors should view the current lockdown situation as a valuable opportunity to change the way they bank and thereby benefit from the convenience and security afforded by digital platforms.