The world of savings has changed a lot over the decades, with instant gratification a key part of society today. With July being National Savings Month, Justmoney looks at the world of savings today.
A childhood lesson
Pierre Puren, financial adviser at PSG Wealth Jeffrey’s Bay, notes that he was taught the valuable lesson of saving from a young age. For every R1 that he received either from pocket money or working during the holidays, he was made to save 40% for the future or a specific goal with no access to the money. The remaining 60% had two purposes, 40% could go towards any good or experience, while the last 20% had to towards a charity, an individual less fortunate, or be spent on a good cause.
“I am grateful to this day for these valuable money lessons, although at the time, these stringent rules were often met with serious disdain,” says Puren.
But it’s not only children who find it hard to save. We are in a world where saving is overlooked to purchase the latest cell phone or gadget that you ‘have to have’, while long term needs such as saving for retirement or purchasing a house are overlooked, in some instances, until it is too late.
The world of today
Instant gratification is a part of everyday life. Gone are the days where you had to wait for the next episode of your favourite series, now you can binge watch the latest series via streaming services such as Netflix or Showmax. Anything you want can be found with the click of a button.
“You can pretty much find anything online nowadays and have it delivered to you at warp speed. Creating wealth, however, does not occur in an instant and for most of us it not only takes time, but also an enormous amount of patience and determination - a concept that seems out of keeping with today’s fast-paced world. By trying to exercise the patience to wait for something, we are in essence fighting against the tide,” states Puren.
Saving to accumulate wealth takes persistence and determination. However, Puren points out that this commitment can quickly disintegrate at the first big sale if you do not carefully consider and work towards your savings goals.
Reaching your savings goals
To start on the path to saving, Puren advises: “Start by putting together a plan that composes of incremental, achievable goals. This approach helps to avoid the risks that come with making big, sweeping decisions. A certified financial adviser can assist with drafting and implementing a savings plan as they are equipped to carefully consider your personal needs, such as income and expenses, and recommend an appropriate investment plan for you. They are also in a position to keep you focused on your investment goals, so you avoid getting side-tracked by the lure of short term instant gratifications.”
There are a number of savings vehicles available to help you save and reach your financial goals. Puren elaborates: “Tax free savings accounts offer tax free growth and are ideal for smaller amounts as individuals are limited to a maximum contribution of R33 000 per annum. Endowments are a tax efficient investment vehicle for individuals with a marginal tax rate of more than 30% p.a., and with tax deductible contributions made to retirement savings products like retirement annuities (RAs) having been increased to 27.5% of your annual remuneration or income (capped at R350 000 per year), this too offers great value for longer term savings - especially since all other savings are made with after-tax money.”
With such a low savings rate and bad savings culture in South Africa, it can be hard to get into the habit of saving. But it is worthwhile when you see your investments increase.
