Four Ways to Start Saving Today
Saving up money is undoubtedly one of the most important aspects of financial well-being.
It ensures that you are spending less than you earn; have an emergency fund for life’s unexpected events; will be able to retire one day without being dependent on the state or your family; and have savings for making your dreams come true, whether to travel, start a business or send your kids to university.
Despite the importance of saving for financial health, the savings rate in South Africa is dismal. Discovery Bank noted last year that South Africa’s net household savings rate is just 0.3% of household disposable income. The most recent Old Mutual Savings & Investment Monitor also found that employed respondents in metropolitan areas save just 14% of their income and that these formal savings do not seem to cater for longer term goals, such as education or retirement. In addition, according to SA Reserve Bank statistics, while 16 million South Africans have savings accounts, almost half of this money is in accounts with very low – if any – interest.
The good news is that you don’t have to be a statistic. If you want to save yourself from financial difficulty, implement these four simple tips and start saving today.
1. Start immediately
Don’t procrastinate! Start today by putting your change in a jar tonight and every night; opening a savings account and depositing your first savings – no matter how little; or speak to your financial coach about a tax-free savings account.Thanks to the wonder of compounding interest, what is more important when it comes to saving is not how much you save, but rather how long you save. Start immediately and give your savings as much time as possible to grow.
2. Pay yourself first
Most people will say that they simply don’t have any money left over at the end of the month to save. Turn the tables by prioritising your savings and paying yourself first, perhaps by setting up a debit order that automatically pays your savings into a separate account as soon as you receive your salary. It may seem impossible at first, but if your savings are not easily accessible, you will be pleasantly surprised to find that you are able to adapt your living expenses.
3. Save even more
Once you see your savings growing month after month, you will be motivated to keep increasing the amount that you are saving each month. It doesn’t matter how little you start with, but the aim should be to save at least 10% of your pre-tax income every month. Increase your savings when you get a salary raise; save a portion of any extra money you might receive, such as a bonus or a gift; and continuously look for ways to cut your expenses so you can save more each month.
4. Keep your goals in mind
Whether you are saving for an emergency fund to reduce your financial stress; funding a comfortable, independent retirement; saving up to buy a home; or planning a dream trip; it is important to remind yourself often why you are saving. It will help you stay motivated and on track.
Saving is crucial to reducing financial stress, providing a safety net for emergencies and building a financially secure future. Remember, your financial coach is always ready to help!