The no-paperwork, no-sacrifice, no-fee tax-free savings account

It’s not often that I’m seriously impressed by a new investment product, particularly when it comes to those offered by large insurance companies. But Liberty gets ten out of ten in my books for its latest innovation, called “Stash”.

In a nutshell, Stash is an app-based tax-free savings account (TFSA) that creates savings out of spending, has no paperwork (it takes all of 49 seconds to start the investment), and no fees. As an added bonus, when you download the app from the Play Store, you receive R50 to kickstart your investment and R10 for every time you refer a friend.

Aimed at young, tech-orientated individuals who know they should start putting money away for the future but couldn’t be bothered to fill in the paperwork, Stash was inspired by the experience of Juan Labuschagne, head of development at Stash. “When it comes to investing, getting started is the hardest part. I can remember the homework I had to do to make sense of where I was putting my money. It seemed like too much work and I kept putting it off. Investing should be as easy as tweeting – that’s the goal of Stash,” says Labuschagne.

Rather than setting up a debit order or transferring money into the savings account, it is linked to your bank card. Every time you spend money you can select to round up the amount to the nearest R10, R20 or R50 and that is deposited, or stashed, each day into your TFSA – a similar concept to FNB’s Bank Your Change.

For example, if you have set your Stash account to round up to the nearest R10, then if you swipe your debit, credit or cheque card to buy a pizza for R56, an amount of R4 is also deducted from your bank account and is deposited into your TFSA. If you selected to round up to the nearest R20, then R14 is deducted and if you selected R50, then R44 would go into the savings account. You can also tap and add money to the fund whenever you choose, just as you would with a smartphone purchase.

Stashed amounts get invested into an index tracker

The amount in the TFSA is invested in a tracker fund of South Africa’s 100 largest companies, which should give you a performance in line with the JSE All-Share index.

Stash also comes with interactive features to encourage users to invest. One example stashes money every day that it’s sunny in your area. Every morning, Stash checks the weather in your area. If it’s sunny, you stash money. You can choose to stash R5, R10, R20 or the maximum temperature of that day (in Rands). Before 1pm each day, you can stop this “Sunny Money” from getting stashed on a sunny day. You can also set a monthly limit to the amount that gets stashed.

How to sign up

The Stash App is available only from the Android Play Store, though it will be available in the Apple Store later this year.  You enter your name and cellphone number, which is the only verification needed to open the investment. FICA documents such as your ID and proof of address are only required when you withdraw from the investment or contribute more than R2 000 per month.

As you do with SnapScan or Uber, you simply link your card to the App, which is managed by the same team behind Snapscan, a subsidiary of Standard Bank. Each time you spend, the bank’s notification SMS is also sent to Stash which then calculates how much to deduct from your bank account each day based on your round-up value and number of purchases. Currently accounts and cards with all of the major  banks other than Capitec, can be linked to the app. Capitec needs to adapt its technology, though Labuschagne expects this to be resolved in the next few months.

Why no fees?

Remember nothing is free. Liberty is very open about the fact that the value for them sits in the data they will collect on aggregate about the spending patterns of South African consumers.  This is the same reason retailers offer reward programmes – it’s all about information.

Intelligent use of data will refine their risk analyses when it comes to underwriting insurance policies. For example, research shows that people who regularly top up their airtime have a better risk profile than those who randomly top up when their data is finished.

The information remains private at a user level, as the information is anonymised before it’s analysed, but the behaviour patterns are utilised to improve information. Labuschagne is adamant that the data will not be used for lead generation. “We don’t want to see reviews on the App Store saying that Liberty is using Stash to give leads to their financial advisers,” Labuschagne told journalists at a press briefing.

Why no FICA or forms?

The app is able to verify the user using smartphone technology, and as your bank will only send an SMS to your phone, it’s not possible for you to link someone else’s card to your Stash account.

As far as FICA is concerned, Liberty is taking advantage of the provisions within FICA that do not require full FICA vetting on investments of less than R25 000 per year.

This article first appeared in City Press.