09 Apr Start saving early
Before spending money on anything else, set aside a realistic portion of your income every time you get your salary paid.
Here’s 5 good reasons to make a start!
1. You have fewer commitments.
When you’re young and starting out, you may have fewer commitments such as a mortgage bond or family expenses. Later in life, a large chunk of your salary – as much as 30% of your gross income – will be spent on a home loan and when you add the financial demands of having a family, saving becomes more challenging.
2. Build an emergency fund.
Start with an aim of building up savings of 2 to 3 times your take home pay. Use these savings to mitigate unexpected (but inevitable) expenses such as car repairs, or other immediate demands made on you. Without these savings you may need to source cash through a credit card or personal loan which may charge high interest rates and may place you in an early debt trap.
3. The magic of compound interest.
It’s more mathematics than magic, but as your savings grow, you’ll start earning interest on interest earned every month. The compound effect of this will amaze you, and it’s a valuable early lesson which can shape your future attitude to the power of savings.
4. The value of time.
When you’re young, your savings have more time to grow. Every year lost loses that compounding interest and steady growth of savings. In South Africa, it is estimated that as much as 90% of people cannot afford to retire comfortably they wish that they’d started to save earlier.
5. Build off a strong platform.
Learning to pay yourself first and making that a life mantra, that discipline will serve you well going forward. As your life changes, you’ll hopefully maintain that emergency fund but start moving into higher growth savings categories such as pension fund contributions, retirement annuities, and unit trusts, among others.
By starting to save early, you’re taking your first step to growing your wealth and, with time on your side, and a mix of savings and investments, your savings can enjoy compound interest, and your investments can ride market shifts.
Bianca S Moyo
Communication Senior Manager
Salt Employee Benefits
MoyoB@salteb.co.za
salteb.co.za