When it’s holiday time, what will be first, family you can’t wait to see, or the lure of faraway places? Where will you go?
An overseas holiday is expensive and there’s always the question of the purse – and how to pay for a trip. If you have been saving up, and putting extra money into your access bond, your savings will be your saving grace. If you must swipe the credit card, that may be painful – and we can show you just how painful.
Do the math: Holiday payment with your savings or credit card
If you’re planning a trip of R70 000, these are the sums:
Saving upfront
- Investing R1 028 per month in a Momentum Savings Linked Investment or Endowment will give you R70 000 after five years if the investment grows at a 10% gross rate.
- The total contributions will be R61 680.
- At an inflation rate of 6%, the real value will be R52 300.
Paying with your credit card
- Let’s say your credit card interest rate is 22,25% (the repo rate of 8,25% + 14%, as set by the National Credit Regulator).
- A monthly repayment of R1 865 is required to pay back the amount over 60 months, if the bank allows it.
- The total contributions will be R111 900.
The benefit of saving vs paying with a credit card
- Paying for the trip with a credit card and repaying has a massive financial impact.
- By saving now and paying later you will save R111 900 - R61 680 = R50 220.
- You can finance your next holiday with the amount you save in interest repayments on your credit card.
You won’t regret the sacrifice of medium- to long-term savings. With Investo, our investment options can even help you save for retirement. To find the best Investo solutions for your savings goals, chat with us or speak to your financial adviser.
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