In July, a month where attention to savings is given on a national scale, a lot is said about savings; from how to spend less in order to free up money to save, how best to identify your financial goals or how to invest wisely. The many savings comments and advice given over this time could be quite overwhelming if you realise the importance of saving, but don’t know how or where to start.
Aneesa Razack, Head of Strategy at FNB Savings and Investments shares her 3 golden rules for saving
Rule 1: Don’t snub the small amounts
According to FNB Research, a key difference between savers and non-savers are that savers believe in the value of small saving small amounts. Whilst you might think that to get into the habit of saving will require a dramatic lifestyle change, you will be amazed at how small changes can help free up extra money for you to save towards your goals. For example, deciding to not buy a cappuccino at work every day could free up R15 every working day. That doesn’t seem like much, until you realise that it adds up to R300 a month.
Small adjustments to your spending will free up the money that you need to save, despite increasing pressure on your disposable income. In an economy where the cost of living is increasing, these small amounts can help you to meet your savings goals despite financial challenges.
Rule 2: Hands off!
When it comes to saving, time is your ally. The more time you have the better because you benefit from compound interest or, in simple terms, earning interest on interest. Compound interest boosts the saving efforts of regular savers, even those who only put away small amounts, as it adds more value to savings over time.
Aim to keep your savings going for as long as possible so that your money will start working for you. You can use online calculators to calculate the future benefits of what you’ll earn from this compound interest to keep you motivated.
Rule 3: Pay yourself first
Very often saving is something that people do with money that is left over after all expenses have been paid and it’s almost time for the next salary, but rarely do we have money left to save at this time. One of the secrets to saving is to ‘Pay Yourself First’ by saving something immediately as soon as you get your salary. By placing a scheduled transfer between your transactional account and your savings or investment account, you in essence automate your regular savings and ensure that you pay yourself first. Automating savings will also help in disciplining yourself to save, enabling you to reach your savings goals.
