It is no secret that South Africans don’t save enough- something that many people explain by pointing to the pressures on their salaries, the rising cost of living and continual increases in the costs of basic requirements such as fuel and electricity.
But says Nolene Parboo, Senior Manager: Savings & Investments at Standard Bank, the reality is that saving is nothing more than a habit. A habit once learned is something that is easily sustained and brings major benefits to families who have mastered the art of putting away money for their futures.
Moving from battling to make ends meet every month to becoming an effective saver is simple if several guidelines are kept in mind, continues Ms Parboo. Steps to follow are:
· Do a family budget. Before you can save you have to know what you are spending.
· Look at exactly where all the money is going every month. A budget usually delivers several shocks, the major one being the realization of just how much money is being spent on things that aren’t necessary.
· Identify where you can cut back. This could be by closing accounts that are unnecessary and to which payments are being committed every month. On a simpler basis it could be on swapping that bought lunch at work every day for a packed lunch from home. For example, if you spend R25 a day on lunch at the office canteen, this translates into R500 a month (20 working days), or R 5 500 a year (11 months a year).
· Look at your short- term and long-term objectives. Having a concrete goal to work towards makes savings planning much easier.
· Identify how best to save your money. And then take small steps to implement.
· Plan your spending so that if you receive a 13th cheque, it is used to boost your savings rather than paying of some of your debt. To achieve this, put aside money every month for holidays and normal expenses, so that their bonus is really a bonsella.
Once the above steps have been taken and debt is being reduced- and further debt avoided- you should have a positive cash flow. The question then is where to put your savings.
“Banks provide a number of saving options and you can choose a product that meets your specific requirements” says Ms Parboo. “This may be a solution that provides immediate access to your savings or you may opt for a solution such as a fixed or notice deposit product that limits access to your funds.” One of the most recent offerings is Tax Free Savings accounts which are endorsed by government and allow account holders to accumulate up to R30 000 a year without tax being applied”.
“As with all things financial, the earlier you start with a savings plan the easier it is to save and the better the benefits are. It is always advisable to consult a financial planner, either your own or at your bank for professional advice. They would be able to assist you in developing plans matched to the various ‘life stages’ you pass through as each stage would have its own defined objectives”.
The life stages you need to consider are:
· Your 20’s; when the emphasis is on building a strong base for savings by looking at short and long-term objectives and placing money in savings products designed to help you achieve your goals. Consulting with a financial professional is extremely valuable at this stage of your life.
· Your 30’s; the emphasis in these years moves to long-term financial planning to include retirement, funding for children’s’ education and ensuring that you have a balanced investment and life insurance plan.
· Your 40’s; If you have been savings steadily since your 20’s, positive results will be coming through. This is the ideal time, as your ‘earning power’ is increasing, to step up your retirement savings plan.
· Your 50’s; estate planning and reviewing requirements for retirement should take precedence at this stage of your life as your 60’s and retirement come closer. You should also be working on increasing savings and reducing debt.
· Your 60’s; if you have planned well and saved diligently, you should be looking forward to your ‘golden years’ and enjoying retirement.
“One of the most difficult things to achieve when implementing your savings plans is being disciplined so that you do not withdraw savings and use them instead of allowing funds to accumulate. The golden rule is that the longer money is committed to an account, the higher the positive interest rate you receive, which results in a higher return on your investment – which means you get more money out at the end of the day.”
“Saving should be an essential part of life. It should be a habit that begins when you are young, evolve with you as you grow older, and help benefit you when you no longer work. The best time to start saving for the future is today, and with July being National Savings Month, there is no better time to start than now,” concludes Ms Parboo.