Save what you can - your future depends on it

 

Your hard-earned money disappears long before month-end and saving for something meaningful just never seems possible. Rather than worry about what seems like just another financial burden, you put off saving until, one day, you earn more.

Save what you can - your future depends on it. 

But let’s be honest: more money often leads to lifestyle changes, resulting in higher expenses and still no savings.

Saving is not about waiting for a higher income. It is about developing a habit of setting money aside regularly, even in small amounts, to help build a more secure future.

This Savings Month, the Association for Saving and Investment South Africa (ASISA) is challenging you to save what you can, because your future depends on it.

Saving for your future

You need to save for two main reasons. First, life is unpredictable. A small emergency fund can help you pay for unexpected medical costs, replace something that has broken, or cover school expenses without turning to expensive debt.

The second reason is to put money away for retirement. The more you have saved for your retirement, the more independent you can be because you won’t have to rely on your family to help you out. A nest egg in your old age will also enable you to enjoy a more comfortable retirement.

It is less about how much you save and more about making saving a regular habit. Saving R20 or R50 regularly may not seem like much today, but consistently putting something aside helps to build your savings over time. If you leave your savings for some time, the savings you set aside can benefit from compound growth, which means you will earn interest on interest. 

This Savings Month, challenge yourself to save what you can by busting the following myths:

Myth 1: "Starting when I earn more is early enough."

Instead of waiting for the perfect time, start with a small amount you can manage. Even a small amount saved every payday helps create the habit. Arrange for the small amount to be automatically deducted from your everyday account and transferred to your savings account on payday. Your savings should be held in a fixed deposit account to prevent easy access.

Savings tip: Choose one expense you can reduce slightly this month - a cold drink at lunch or takeaways on Friday night - and move that money into a separate savings account.

 

Myth 2: "Saving small amounts isn't worth it."

Many people think saving only works if you can put away lots of money every month. But every successful saver started somewhere.

Once you start, even with small amounts, your confidence grows, and you save more and more. When extra money comes your way, such as a stokvel payout or a work bonus, you can add more to your savings. But don't overlook the power of small amounts saved regularly. Over time, they can make a meaningful difference.

The important thing is consistency, not perfection.

Savings tip: When you save towards a goal, it makes it easier to save consistently. Set up a separate account and name it something meaningful like "Emergency Fund" or "School fees”. Many people are often more motivated to save when they know exactly what they are saving for.

Myth 3: “Dipping into my retirement fund’s savings pot is not a big deal.”

If you are lucky enough to have a retirement fund, you are already saving. But dipping into the savings portion of your retirement fund once a year drastically reduces what you will have available in your old age.

Even if you can replace the money taken from the savings pot in the future, you lose out on the compound growth. The more you take out of your savings pot every year, the less you will have at retirement when you are likely to need it most.

Also, remember that withdrawals from your savings pot are taxed and attract an administration fee.

Savings tip: Aim to build up an emergency savings fund, even if you start small. Instead of having to dip into your retirement savings for every unexpected expense, you can use the money in your emergency fund. This way, you allow your retirement savings to continue growing while avoiding taxes and fees.

Save what you can

You do not need to save perfectly. Some months will be harder than others, and that's okay.

What matters is creating the habit of putting something aside whenever you can. Small, regular savings today can give you more choices, more security and greater peace of mind tomorrow.

This Savings Month, don't focus on how much you can save. Focus on getting started.

Save what you can – your future depends on it.

This content is brought to you by the Association for Savings and Investment South Africa (ASISA) as part of its Savings Month education initiative to help more South Africans #SaveWhatYouCan.

Why it is best to 'pay yourself first'

 

Every July, we are reminded of the importance of saving during Savings Month. Yet few of us manage to fix our lack of savings. That’s why Smart About Money, an initiative by the Association for Savings and Investment South Africa (ASISA), is campaigning for you to #PayYourselfFirst.

Pay yourself first is a budgeting technique that ensures you allocate a fixed amount to savings each payday before you spend on anything else. Establishing this habit will help you be disciplined and achieve your financial goals.

Start by working out what you spend on essentials, such as accommodation, transport, electricity and groceries. Then set a realistic amount within what is left of your income that you can save every month.

If you leave saving until the end of the month, you will be tempted to spend on non-essentials, such as clothing, entertainment or eating out. You will then convince yourself that you have no money left to save.

If you pay yourself first, your savings are transferred from your account as soon as you are paid. Soon, your contribution will feel like your other deductions or debit orders, and you will learn to live without this money.

Pay yourself first

The key to paying yourself first is to set up a separate savings account or investment, such as a unit trust or exchange-traded fund (ETF), and automate a transfer or payment to that account on the day you are paid.

For emergency savings or short-term goals like a holiday or renovations, choose a savings account with a fixed term aligned to your saving horizon.

For medium- to long-term savings, consider a unit trust or ETF with potentially higher returns.

Giving your savings goal a name, targeting an amount and working out how long you need to reach it, will discourage you from raiding your savings.  Use tools like the Smart About Money Savings Goal Calculator to determine how much you need to save each month.

Even if your initial savings are small, being aware of your goal should prevent impulse spending and motivate you to increase your savings amount when your earnings improve or your expenses reduce.

Setting goals

You can start small with just one goal, but over time, you could set up several savings and investment accounts tailored to different goals' timelines.

·         An emergency fund

Start with an emergency fund. An emergency fund helps you to stick to your budget and not raid your savings when financial emergencies, such as injury or illness, home or car repairs, arise.

·         A short-term goal

A short-term goal takes between a year and three years to reach and provides for expenses such as an appliance, a mini-holiday, a wedding or December expenses.

·         A medium-term goal

Save for bigger things, such as an overseas holiday, a wedding, a deposit on a house or a car over three to ten years.

·         A long-term goal

Save for more than 10 years for bigger goals, such as your retirement or your children’s tertiary education. Use the Smart About Money Retirement Savings calculator to work out how much you need to save, and consider a retirement annuity if your employer does not have a fund or you need to supplement your savings.

·         If you are in debt

If you have costly short-term debt, start to pay yourself first by paying down your debts and reducing the interest that is compounding against you. Paying more than the minimum repayment and using the avalanche or snowball method will pay off your debt faster. Avoid new debt by providing for financial emergencies.

Start small

Start small if you need to and build your savings habit. Even modest savings compound over time, and the more you avoid debt, the more you will be able to save.  

Remember:

Saving for a goal helps you in two ways:

·         You spend less on your goal than you would if you used credit that costs you interest.

·         Your savings earn interest that reduces the amount you need to save.

Saving in a retirement fund can also save you tax, which can be used to boost your savings.

If you want to know more about these, or any other personal finance topics, please visit Smart About Money. This free-to-use consumer financial education website is an Association of Savings and Investments South Africa (ASISA) initiative. It can guide you to better money management at any stage of life, from starting your first job, through family life, retirement and beyond.