It's month end, you've gotten paid. You've paid your bond or rent, car and transport, school fees and groceries are done. You've calculated how much you'll need for the rest of the month and you've got a bit of money left over.
It's not enough to save, you think, so you end up using it. But every little bit of savings count, according to financial experts.
As the year draws to an end and December approaches, households are already looking at their festive expenses and just how much they will need to spend. Not everyone is thinking about saving.
Unfortunately, many South Africans are cash strapped and do not have a savings account.
“The reality is that we need to start thinking and planning to thrive economically and not live hand to mouth, being financially dependent on others, and end up in debt,” financial advisor and debt counsellor Thobelani Thwala tells Drum.
There are different types of savings for different needs and therefore one should not be using all their savings in December unless they had specifically put the money away for that purpose, Thobelani says.
“For example, the older generation use stokvels as a way of saving for December/January needs. This is a brilliant way of ensuring that you don’t get caught unprepared by the crazy season and I think more younger people should do the same. This type of savings should not be confused with savings for emergencies or even short-term savings for specific needs like buying a car,” he explains.
A common misconception that Thobelani rebukes is that you need to have lots of money to afford to save.
Taking into consideration the state of the economy, black tax, and other family responsibilities, when it comes to saving – “there is no one size fits all,” he says.
“Having family responsibilities, especially in the black communities, as well as other immediate financial needs can be overwhelming, but we should always have a goal in mind. We ought to always want a better financial future and it begins with small steps. Save what you can afford, if you are putting something small away, you’ll see a difference in your finances and be less prone to debt,” Thobelani explains.
“We all have different financial needs and should try and tailor make our financial goals accordingly. There are savings plans designed for each income bracket that you’ll find suitable for your budget needs. You can start from as little as your affordability allows, the important thing is to get started,” says the financial advisor.
In an attempt to make easy money and have savings, individuals tend to turn to ‘get rich quick' or Ponzi schemes.
“These promise to make a person wealthy over a short period without having to put much effort. Get rich quick schemes are illegal and prohibited by the Consumer Protection Act 68 of 2008. Sec 43(2). They normally use multi-level marketing, which is not all illegal. Therefore sometimes it makes it difficult to distinguish,” he says.
The financial and debt counsellor urges individuals to be patient when starting a nest egg. “Savings will require time to generate income and therefore require patience,” he says.
Lastly, the attitude of ‘I will die anyway so I might as well spend all my money' is damaging, he says. "The reality is that an average person’s life span has increased past age 70 and continues to rise, which means you are most likely are going to live past retirement age. The danger here is that many ends up depending on government pension grants and some on their children’s financial assistance due to lack of foresight."
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Here are five saving tips to get you started
1. Make sure that your savings are automated through debit or stop orders. This way you won’t use all your money before you start thinking about putting a portion of it away. This also creates discipline as this is a set amount monthly.
2. Prioritise retirement savings. You get taxed as an income earner, use the opportunity of a tax rebate by paying as much as you can towards your retirement savings. You get up to 27.5% of your annual income back from the South African Revenue Services (SARS) capped at R 350 000 a year from your retirement contributions.
3. Don’t put all your eggs in one basket. Meaning, weigh your alternatives, and compare them based on your savings needs. For example, you don’t put away emergency savings in fixed savings but they are both necessary. This also goes for investments as there are risks involved, so don’t lose everything if something goes wrong.
4. If you can afford to invest, make sure you do proper research on the type of investments available and their risks. Maybe seek the help of a financial planner here.
5. Always have a goal in mind and use that as a motivation. Whether it's saving for a car, education, retirement, December/January needs or even savings for emergencies. When there is a measurable reason behind it, it helps to keep you disciplined and committed.