Did you know; as South Africans, we have been branded as one of the worst countries when it comes to saving. We would rather have debt than open a savings account. Here are 5 tips to help you get started with your first savings account.
Studies have shown that we are too attached to instant gratification and the psychological thrill of “keeping us with the Joneses”. We have become so concerned with what others think about us, that we don’t take our future into consideration. We would rather live a life in debt and luxury than to live a life being debt free and wealthy.
To live a wealthy life, you simply need to start. And it starts with saving.
Having savings allows you to take advantage of future situations, whether you want to travel, study, purchase a house or a car or maybe you want to start investing. You are spoilt for choices.
Set goals for yourself
Before you start saving you have to decide why you want to start saving. Make a list of your goals and add the amount you need to achieve that goal. You might want to travel, purchase a house or a car, or maybe you want to start an emergency fund.
Start a savings account
This might sound very obvious but make sure you cover your bases. You will want to separate your savings from your active account. You don’t want to be digging into your savings when you’re out with your mates.
Opening a savings account with your bank is easy. Banks generally have various savings accounts on offer, so ask your bank which account would best suit you. You’ll have to do some research to find the best savings accounts that offer great interest rates, that work for you.
Earn interest on your savings
There are a lot of different types of saving accounts to choose from. And some saving accounts are more attractive than others. Choosing the right account will be determined by your goals, are they short- or long-term goals.
If you have an emergency fund, you will want instant access to your money. You won’t earn a lot through interest with these accounts, but they do make it very handy when it comes to saving.
If you have long-term goals, you could open a tax-free savings account (TFSA). These types of accounts offer higher interest rates, which means you’ll make money the longer you leave it. If you have one of these, it’s best to forget about it for at least 10 years. The compounding interest will work in your favour over this period.
Pay yourself first
If you haven’t yet, you should start automating your payments and on the top of the list should be You. Paying yourself as soon as you get that salary will ensure that you’re saving before spending it all. As a general rule, a good place to start saving is to put away at least 10% of your total salary.
If you struggle to save, rather think about saving as another payment, this will ensure that saving becomes a habit. That being said, if you automate your payments you don’t have to get into the habit of saving, it’s all being done for you. You will soon get used to a smaller budget and your savings account will thank you for it.
Track your spending habits
The one thing no one really likes to do, but we all have to do, is budget. If you start understanding how you spend your money, the sooner you’ll start spending less on the things that don’t matter. Budgeting helps us identify how much we spend on the things we need compared to the things we want. And we should always try to spend more on the things we need, instead of the things we want.
When you track your spending habits use a spreadsheet. It makes it easy to identify you’re spending habits and give you ideas about where to cut down on certain things.
Remember that your savings are a part of your spending, you’ll have to deduct this from your income as well.
Start saving today
Some of us want to start saving but don’t know how to start. It’s easy and simple to start saving with the 10 Month Automatic Withdraw approach. The idea is to save up and pay yourself back in 10 months’ time. This exercise helps us to understand how easy it is to get through the month and start saving at the same time. You can use this exercise on your kids as well. Simply use R5 instead and reduce the number of months.
Start with R100. Just R100, that all. Once you’ve opened your savings account, deposit R100 into the account every month. Set-up an automated withdrawal once you’ve reached 10 months. If you get paid on a specific day, set the withdrawal to go off on the same day. Otherwise, try to find a date as close as possible to payday.
Once those 10 months are up, you will see how easy it was to survive without that R100. When you’re comfortable with putting away that money, start increasing the amount. Over time you’ll be financially stable with a good-looking savings account.
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