South Africa has one of the worst savings rates in the world. Let’s change that. Let’s stop living a luxury lifestyle and start adopting a money saving culture. Find out how you can start saving in your 20’s with our 7 money saving tips.
Unfortunately we don’t get educated on personal finance throughout high school or university. We’re left to figure out how to manage our personal finances ourselves, and most of us can’t seem to figure out how to do it right.
The lack of financial education has left most of us clueless. So much so that we would rather take out a loan than start saving.
Some might argue that South Africans don’t save because the country is overpopulated. It has a high unemployment rate. Or that majority of people are far too poor to start saving.
Although these arguments prevent a huge number of South Africans from saving. The truth is, the majority of middle-class South African also do not save, and if they do, they don’t save enough.
Let’s start saving our money and build a stable financial future for ourselves. The best time to start doing that is while we’re young.
Here are 7 money saving tips for all the 20-somethings out there:
1) Learn the art of self-control
If you are one of the lucky ones, you know the value of self-control. If not, keep in mind that the sooner you start the better you’ll be able to have control over your finances. It’s always a better idea to save up for something than to swipe that credit card over and over again.
Making purchases on a credit card means that you’ll have to pay additional interest. Why would you want to pay more for a pair of jeans, if you could have just bought them a month later?
Saving up for a purchase takes longer, but at least you don’t pay extra for the purchase.
2) Take control of your financial future
This is probably the most important of our money saving tips. If you don’t take control of your money, you will end up spending it all on stuff you don’t need. And before you know it, you’re knee deep in debt. That’s a rabbit hole you could easily avoid.
If you have to have debt, ask yourself if it’s an investment to your future or not. For example, buying a house is considered good debt, swiping your credit card is usually bad debt.
Taking control of your finances means that you know what’s cracking in your budget. If you know what your budget looks like, you’ll know how much you have to spend on certain things.
3) What are your savings goals?
If you start practicing good financial habits early on in life, chances are you’ll be better off than most, later on in life. Setting a savings goal helps you plan your future and gives you something to work towards. Making it easier to start saving.
One of the first things you should save up for is an emergency fund. An emergency fund allows you to pay for any unexpected costs and could potentially keep you out of debt. Yay!
For example, it’s the middle of the month and you’re driving on the highway. You hit a pothole and boom! You’ve got puncture. Now you’re driving around town with your spare wheel. You’ll have to replace that broken tyre, and possibly do a wheel alignment and balancing. That’s going to put you back at least R1 500, if not R2 000.
You could have easily paid for the replacement tyre and wheel service if you had an emergency fund. You would have had no extra debt and sorted everything out quickly and easily. “Hashtag, stress free.”
4) Save up for a down payment for a house.
This does not mean you should purchase your first house in your 20’s. But to start saving for your first house is a great idea, if you can.
Generally a down payment for a house is about 20% of the price of a house. That can be a pretty big amount. But the bigger the down payment you make on a house, the lower the mortgage will be, and the nicer the house you’ll be able to afford.
The next and most crucial thing you should start saving for as soon as possible is your retirement. Most people retire with a low retirement fund. Making those last years a bit more uncomfortable than it should be. You should start saving for retirement as soon as you have your first job. This is important because of compounding interest. Compounding interest allows you to make more money by leaving your money alone for as long as possible. The longer you leave it, the more you’ll make.
Some companies add a small amount to a pensioner’s fund for their employees. This helps a lot, but to secure a comfortable retirement, start your own retirement fund that you contribute to every month.
Start with one goal, start small, start making it a habit. Just start.
5) Rename that savings account
Instead of simply having a ‘savings account’ change the name of the account to “Japan Trip 2019”, “First House Deposit” or “Damn Student Loan”. Be as specific as possible when you change the account name. The name will serve as a monthly reminder of what your savings goals are.
This doesn’t actually help you financially, but it is fun, and it keep you motivated every time you see your goal.
6) Look for the best interest rates
Start looking for the bank that offers you the best interest rate for your savings account. You could do a quick check online to see which bank offers the best rates. It also helps if your saving account is at a different bank than your cheque account. This is where the old out of sight an out of mind trick comes in handy. If you don’t see it, you won’t spend it.
If you restrict yourself from using your savings account, changes are you’ll end up saving more.
7) Make it a habit
You will find it difficult to start saving if you don’t make it a habit. You have to be fully committed to it. Challenge yourself to stop spending. Reach for those goals and cut back on living expenses.
To help keep your savings on track, automate your savings. Set up a stop order to go off every month as close to payday as possible. This will prevent you from even trying to spend your money on other things.
Always keep saving
There are huge psychological, emotional and physical consequences when living a stressful life. Living from pay cheque to pay cheque just to pay off your debt is no way to really live. Your debt will always prevent you from doing what you really want.
There is way to avoid that, all you have to do is to always keep saving. To secure a financial future for yourself will keep you motivated and bring you more happiness. There is so much in our life that we have no control over. By putting some money aside, we prepare ourselves for what could happen in the future. You have absolutely nothing to lose, and only more happiness to gain.
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