Time is on your Side
Instant gratification has become our norm, but in the case of savings, starting from an early age means that your money has more time to work for you. The results of your good decisions take time to develop. Savings can help you out in tough times to cover your emergencies and help you achieve the things that matter to you. As a start, when you move from one job to the next, make sure you keep your retirement savings invested, whenever possible, so that they can continue to grow.
Starting young is easily the best way to get ahead. Belinda Sullivan, principal consultant at Alexander Forbes, offers the following tips:
1. Keep at it
There are still plenty of years for you to build up and grow your wealth. Continuing to invest when markets have lost value means buying more for the same rand amount. This can benefit you as markets recover.
2. Cash is not necessarily safer
Although switching into cash or other conservative investments may seem like a good idea at times, these investment types are less likely to grow your money over time.
3. Advice matters
Getting professional personalised advice, at the right time, can help you decide which of your goals to prioritise. Identifying the solutions or services can help you achieve them and can improve your chances of financial success throughout your life and in retirement.
4. Avoid fear
Don’t let fear and the other negative emotions we experience in tough times stop you from achieving your goals. Use the opportunity these tough times present to assess how you have been doing financially. Revisit your plans and goals and establish good financial habits that will help you achieve what matters most to you.
5. Compound interest
Harness the power of compound interest. This is interest earned on the total, which includes the original amount and the interest already earned. For example, if you deposit R100 in a bank account at 10% and interest is calculated yearly, your balance will be R110 at the end of the first year and R121 at the end of the second. That extra R1, which was earned on the interest from the first year, is the result of compound interest. Interest can also be compounded monthly, quarterly, half-yearly or in another way.
6. Don’t keep up with the Kardashians
Avoid spending money you don’t have as this leads to accumulating debt. On average 57% of millennials have spent money they weren’t originally planning to on products they saw in their social media feeds, according to research from Allianz Life Insurance Company of North America.
7. Invest in yourself
Investing in your professional growth by upskilling could be the best investment you will make. Yuval Harari, Israeli historian and author of Sapiens, Homo Deus, and 21 Lessons for the 21st Century, says: “Due to the way technology is advancing, people will have to learn to reinvent themselves time and time again.”
Having a savings ethic that balances your long-term savings needs with short-term requirements will ensure that you can still enjoy life without tapping into savings that you have earmarked for later in your life.
“Youth can take more risk than older people because time is on the younger investor’s side,” says Sullivan.