South African youth may feel there is little to celebrate in the current depressed economic climate. The increased cost of living is making it hard for families to make ends meet. Those entering the world of work for the first time are learning first-hand just how difficult it can be to make your salary last the month.
Families with emergency savings will be best positioned to help learners or university students in their family at this time. If the Covid-19 lockdown taught us anything over the last few years, it was the value of saving and investing money.
So, rather than feeling despondent, young people should consider the advantages they have when it comes to financial planning. The biggest advantage is time.
Everyone who is earning or being given money each month, no matter the amount, has the ability to save.
Good financial planning and starting early are the keys to building wealth – start as early as your first pay cheque. No matter how small the amount, it is important to start saving or investing sooner rather than later.
Financial planning for a 20-something-year-old may mean waiting for the winter sales before splashing out on new items or only going out with friends every second weekend.
These are good strategies, but what you should be thinking about is putting a percentage of what you intend spending into a high-interest savings or investment account before anything else.
Real financial planning involves setting short- and long-term goals and putting a plan in place to meet these.
Here are 5 benefits of sound financial planning
- Gain financial understanding. The more closely you work with your finances the more you will be in control of your money, instead of it controlling you.
- Meet your goals: No matter what it is – paying for studies, buying a car or buying a house – planning will help you achieve your dreams. The sooner you start, the sooner you get there.
- The future looks brighter: Just like physical exercise, the sooner you start looking after your finances, the sooner you will see the benefit. If you only start exercising diligently late in life, there is a good chance you will find it an uphill battle. If you start early, however, you just have to maintain your physique throughout your life and reap the health benefits. It is the same with saving money – small steps, big reward.
- Rainy days covered: As the Covid-19 pandemic has shown us, expect the unexpected in life. Navigate life’s storms with an emergency savings fund. This will come in handy for unexpected car repairs or an emergency medical procedure you would not have been able to fund otherwise.
- Peace of mind: Money worries can cause a lot of stress. Avoid this by making good financial planning part of your life from an early age.
Also, never forget the importance of retirement planning.
As a 20-year-old university student or someone who has just started working, you are unlikely to be thinking about retirement, but the truth is you should be leveraging the years you have ahead of you to build a sizeable nest egg for the future.
Retirement planning is the safety net which will determine your quality of life once you stop working. It may seem decades away, but time waits for nobody. The best time to start financially preparing for your retirement is today.
Brought to you by African Bank.
