Black Friday as an investment: pre-buying what you need anyway
Buying R2 000 of things you would need by January at 20% off saves R400 in about two months - far more than a year in a savings account - but repaying it on a card at 20% over 12 months hands about R179 back in interest.
In 30 seconds
- R2 000 of planned January spending bought at 20% off saves R400 - a 20% return in about two months on money you were spending anyway.
- The same R2 000 in a savings account at 7% earns about R140 in a full year.
- Repay the R1 600 on a card at 20% over 12 months and about R179 goes back in interest - almost half the saving.
Why a discount can beat an investment
An investment return is money you earn on money you keep. A discount on something you were definitely going to buy is money you keep that you would otherwise have spent. If the purchase is certain, the discount works like a return - and it arrives straight away, without market risk.
- Buy now: R2 000 of school shoes, stationery and household stock you would buy in January, at 20% off - you pay R1 600.
- Saving: R400 in about two months, or 25% on the R1 600 you actually spent.
- Compare: R2 000 in a savings account at 7% a year earns about R140 over twelve months.
7% is an illustrative savings rate, not a quote; see our savings and fixed-deposit rates page for current published rates.
The conditions that make it work
- The need is certain. School starts, the kettle is dying, the toiletries run out every month. "Might need" does not count.
- You buy only the quantity you would use before the next comparable sale - usually a few months, not a year.
- It keeps. Non-perishables, durable goods, sizes that will still fit in January.
- You pay with money you already have - not your emergency fund, and not credit.
How credit turns it back into spending
Put the R1 600 on a credit card at 20% a year and repay it in 12 equal payments:
- Monthly payment about R148, for a total of about R1 779.
- About R179 of interest - almost half of the R400 saving.
- Add a monthly card fee and most of the saving is gone. Pay the full balance in the interest-free period and it stays R400.
The full sums on credit and impulse buys are in how much you really save, and how much you waste, and the legal ceiling on card interest is in Black Friday on a store card.
Then do something with the saving
The R400 only stays a saving if it does not leak into the next purchase. Move it the same day - into the emergency fund, a debt you are paying off, or a tax-free savings account - so the discount becomes money you actually keep.
How MaxWealth helps
The tax-free savings calculator shows what an amount like a Black Friday saving grows to over the years, using your own contribution and timeframe.
Sources
- National Credit Act 34 of 2005 and the Regulations on limitations of fees and interest rates - ncr.org.za.
- Calculations: 20% of R2 000 = R400; R2 000 x 7% = R140; R1 600 at 20% a year compounded monthly over 12 equal payments, about R148 a month and R1 779 in total (MaxWealth workings).
Education, not financial advice. This post explains how the rules and the arithmetic work. It does not recommend any financial product, and your own situation may differ - speak to a registered financial adviser or tax practitioner before you act. Figures were checked against the linked sources on the date above.