Many may say money was tight even before the national lockdown, so where will savings come from now?
The reality is though that people with emergency savings are going to ride this storm out in a better position than most, says George Roussos, Chief Operating Officer at African Bank.
He believes that if anything, lockdown has underlined the importance of developing good savings and investment habits. Now is the time for consumers to review their monthly expenditure and think about saving money.
Planning for the future and being financially prepared for the unexpected (like the national lockdown due to the coronavirus) starts with adjusting your monthly budget to include savings and investment goals, and then prioritising these.
Find money to save, Roussos says, and remain committed to your savings goals.
Five ways to find money to save:
- Keep track of every cent you spend in a month. Yes, this includes the cup of coffee from the garage shop every other morning and pay-day treats, like a takeaway meal. You will be surprised at how much you are actually buying and what you can do without.
- Lower your debt. To do this you need to know exactly what you owe creditors. Try to pay more than the minimum each month to get your debt reduced quicker. Prioritise big debts and get these paid off as soon as possible.
- Use cash more often than credit. Cash is tangible and you immediately notice it is spent. You are likely to be more prudent with purchases using cash than you would be using credit.
- Rank your non-essential and essential expenses. These will be flexible and fixed expenses. Never take money from fixed expenses, like rent or your bond, to be able to afford something non-essential, like a new TV, for example.
- Shop with a grocery list and stick to it. Food prices have escalated dramatically in lockdown with many items now luxuries. Keep essential food shopping in mind and sacrifice all those nice-to-haves (in and out of lockdown) to enable you to reach your savings goals. It will be worth it!
Roussos also stresses that investing is still the best way to build wealth. It offers many benefits, but consumers must bear in mind that investing is integrally linked to inflation.
Inflation is the general increase in prices and the decline in purchasing power of money, which happens annually. The current rate of inflation in South Africa is 4.7%, according to the South African Reserve Bank.
“If you don’t invest and grow your money, you will actually lose money over time. This is all as a result of inflation,” he explained.
Some of the most common ways to invest today are cash, shares, fixed-interest investments, property and unit trusts.
Roussos says in order to make an informed decision about which investment type suits your financial goals best, you need to fully understand the advantages and disadvantages of each.
“An investment product which offers the best possible rate will enable you to stay way ahead of inflation and increase the value of your money. African Bank’s Fixed Deposit Account offers investors the best rate in the country at the moment – 10.75% per annum,” he added.
In conclusion, Roussos reminds consumers that retirement planning is a safety net of funds which will determine your quality of life when you stop working.
“Good saving and investment decisions are cornerstones to beating inflation and being able to provide for big milestones in your life or navigate your way out of a crisis. If you have regrets about not having saved or invested money in the past, start today. We cannot predict the future, but we can be better financially prepared for it,” Roussos concluded.
