Since July is South Africa’s Savings Month, Johannesburg Stock Exchange’s head of marketing, Mpho Ledwaba, provided insight into the world of saving and the challenges that accompany it.
Why do you think South Africans find it difficult to save every month?
Many people think it’s complicated and expensive to start saving or to invest in channels such as the stock market. Many people are simply not aware of the vast amount of options they have to create wealth. When compared to other emerging markets, South Africa has a weak savings culture in general and our savings rate is quite low.
What would you regard as the most important step to take towards starting to save money?
It is important to set out what your savings and investment goals are and how long you need to invest for. For example, if you are planning for your retirement, your investment horizon (how long you need to invest so you can meet your goal) could be between 15 and 30 years. If you are saving for your children’s education, or perhaps a dream holiday, your investment horizon could be a decade or perhaps three years. Your investment objectives will influence how long you plan to invest.
Many people feel they do not get paid enough to cover their budget, what are your thoughts about this?
Our market is facing a challenge where people have a perception that you need to be a millionaire to start saving and investing in channels such as the stock market.
How much do you need to invest?
A good rule is to invest and save only as much as you can comfortably afford after meeting your personal and household expenses. For example, if you invest in a tax-free savings account, it is possible to be an investor on the stock exchange for as little as R300 per month.
What can people do to keep on saving even if consumer prices go up?
Preparing and sticking to a budget is an essential financial tool. If you don’t know how much you have and how much you’re spending, you’re heading for trouble. Be honest about what constitutes a necessity or an indulgence – and if you really want that big ticket item, set up a debit order to help you save for it over time. Ultimately, if you know exactly how much you are earning and how much you are spending and on what, half the battle has already been won.
Is it important to start your own business, or is being a salaried worker equally financially viable?
You can build wealth by being an entrepreneur or being a salaried worker. Managing your money is important either way.
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