1. What is it?
Savings (also known as saving account) is one of the most famous, traditional and conservative existing investments in Brazil, due to its easiness, simplicity and safety. This kind of investment boils down to a fixed rate profitability: you only need to have a bank account and it is possible to invest. Because it is a low risk investment, its financial return is also low. Savings is a highly-liquid investment, due to its capacity of cashing out at any time. With the savings fundraising, the banks directs this money to the following destinations:
- 70% for housing and at least 80% of this total in types of operation involved in the Financial System of Low-Cost Housing (SFH) – and the rest in free market rate operations;
- 30% for other nonresidential operations and 15% of this total in compulsory deposit along BACEN, which may be collected in cash and the rest in financial resources and free market operations.
The deposited values are remunerated at a rate of interest of 0.5% per month (or 6% per year) compounded with the Referential Rate (RR). This rule is valid until 05/03/2012. From that date, rules has changed. For deposits made BEFORE that date, the rules remain the same. For deposits made after May 4th of 2012 and accounts opened from that date on: whenever the Basic Interest Rate (BIR) is 8.5% per year or below that, the savings income become 70% of the BIR plus the RR.
No matter what the investment is, it holds risks. As the savings is a low-returning investment, its risk is also considered very, very low. The higher level of risk is if the bank which you have a saving account in failures. However, even if it does happen, the Credit Guarantee Fund (CGF) guarantees until 250 thousand reais, that is to say, if you have until 250 thousand reais deposited, this money will be safe, because CGF refunds you. Another risk that may be associated to the savings is that if somebody clones your credit card, he may spend all the money saved. Nevertheless, as it is a security breach of the bank, it must pay back the money; but of course, this would cause you headaches. Another risk is if the government invents any other terrible plan, as in Collor Plan, and confiscates all your goods or if the incomes do not exceed the inflation and you lose the purchasing power.
While these examples are just suppositions of the risks that savings are associated, this does not mean that they are going to happen actually, but that they are real situations.
For nonprofit individuals and corporate entities, there is no incidence of Income Tax (IT) upon capital gains. For companies (profit corporate entities) the remuneration is quarterly; there is incidence of Income Tax (from lower rate) and it should be paid only in the act of declaration of income.
5. How it works
Currently, the savings accounts use a specific rate of income to each day (Referential Rate, only) and the deposits are remunerated according with the anniversary date of each balance, even if they are in the same account. As if they were many accounts in one.
The savings profitability is not daily, as many people may think. It is calculated trough the date of anniversary of the application. In other words, if you make a deposit in your savings account on 02/02, this deposit will only be corrected on 03/02. The correction is done monthly, on the applications dates. If you make an application in another day other than 02, (on 03, for example) it will be corrected separately from application of day 02.
The profitability is always defined upon the smaller balance of the period. For example, if you started the month with R$1000 and you cashed out R$500 after 20 days, the profitability will be calculated upon R$500. This shows that withdrawals made outside the anniversary date can damage the profitability significantly.
In case of anniversary dates on non-working days, the profitability will be credited on your account on the following working day, that is to say, do not cash out on the working day before, as you are going to lose all the profitability of the period. Wait until the following working day after the anniversary to cash out without losing the profitability.
To find out the profitability before the money arrives on your account, just access the Banco Central website and you will know the disclosed RR tax. Add the value of 0.5% to this tax (if Selic is above 8.5%) and apply on the value of the amount. For example, let us suppose you deposit R$1000 reais on 01/15 and you want to know the exact profitability that will arrive on your account on 02/15. Just access Banco Central website and know what the RR tax on that day was. Let us suppose that it was 0.17%. So, add 0.5% totalizing interest rates of 0.67%. After that, just apply 0.67% upon R$1000, which is to say: the total revenue of the period will be 6 reais and 70 cents. It is simple, is not it?
Remember that deposits made on the days 29, 30 and 31, it will only start counting on the day 01 of the next month. This is for any problem come up, since there are not these days in every month. Therefore, it does not compensate deposit on these dates, because they will not have profitability: they will only have it on the first day of the following month.
6. Step by Step
It is simple and easy to start investing on savings. You just need only go at a bank branch of your choice, bearing Individual Taxpayer Registration Number (CPF), identity papers, bank statements and proof of residence and asking for open a savings account. It is not necessary be an account holder to open a savings account. All banks offer the same income tax for savings, that is to say, it does not matter in which bank you open an account, the income tax will always be the same. Persons under 18 years of age can also open their own account. In this case, a person of legal age becomes responsible for the application.
The minimum investment will depend from bank to bank. Some banks demand nothing to open an account. Other banks demand at least 100 reais to begin. It is very common that banks offer facilities and services connected to the accounts, for example, deposits and withdrawals made directly from your checking account, the same number and password of your checking account, application and rescue by phone, programming for investment, for periods of up to 1 year, among others.
7. Kinds of Savings
There are three kinds of savings:
Savings Linked (Secured) to Housing Loan
This kind of savings have the same output of current accounts, but the main difference is attained through the contract between the saver and the bank, which links the savings to finance for the acquisition of new and used residential or commercial property, lands, or to extension, renovation or construction of properties. The minimum time limit set by BACEN is at least 36 months of deposits on this account.
In other words, it is a savings, which works as an “out-of-pocket payment”, to ensure the provision of financing. In the contract firmament between the saver and the bank, is set the deposit values, mean to correct, frequency monthly, quarterly, six-monthly), financing conditions, among others. For housings shall be spared tree years to get funding up to nine years; four years to get funding up to eleven years; five years to get funding up to thirteen years; a period of six to ten years to get funding up to fifteen years. If it is a commercial property, the person concerned shall spare 50% from the value of the property he/she wishes to purchase, and then he/she will have the right to a letter of credit with the financing of the remaining value.
Savings with Increasing Return
Created in 1982, its main characteristic is to constitute only one deposit, with earnings credit to your account quarterly, rising and retroactive remuneration at each change in the production rate, in accordance with the period without withdrawal, because they do not allow segmented withdrawals. The interest rates will therefore be: 6.14% per annum from the first to the third quarter; 7% per annum from the forth to the eight quarter; 8% per annum from the ninth to the eleventh quarter and 9% per annum from the twelfth on.
Rural Savings – Green Savings
Also known as Green Savings, it has the same characteristics as traditional savings, including the income, but it is an exclusive product of Banco do Brasil (Brazilian Bank) – BB, Banco do Nordeste do Brasil (Northeast of Brazil Bank) – BNB and Banco da Amazônia (Amazonia Bank) – BASA. The raised funds are directed basically to rural operations credits and the credit operations secured by Agribusiness Certificates of Deposit (CDA) included.
- It is excellent as a reserve fund and ensures an update of the money saved, that is to say, it is better to leave the money to save than keep it under the mattress.
- It have liquidity and it is possible to withdrawal the money at any time, day or place.
- The investor does not pay income tax, nor administration fees.
- It does not have a period of validity nor minimum investment.
- It have guarantee up to 250 thousand reais by the Credit Guarantee Fund – CGF.
- Low profitability. Because of this, the savings cannot always limit the inflation and may not be profitable or as a mean of a good investment, that is to say, if the inflation is greater than its income, your money devalues.
- Liquidity will only happen on its anniversary date, that is to say, you will have to wait one month to have the invested money credited to your account.