Saving money seems like such a simple task. If you diligently dedicate a portion of your income towards an appropriate savings vehicle, over time this will act as your financial safety net.
So why then do so many people struggle to save? We have a look at five money-saving mistakes people make, as well as how to avoid them.
Tip: If you’re struggling to save because you have too much debt, consider debt consolidation.
Common savings mistakes we all make
According to Dhashni Naidoo, programme manager of FNB Consumer Education, there are five savings mistakes that South Africans make:
- They don’t have a savings plan in place. Savings are seen as unattainable and daunting for many.
- They don’t include savings as part of a budget. Being able to save regularly and consistently is important.
- They don’t have the right products to match their savings goal or needs.
- They don’t have an emergency savings fund.
- They fall prey to get rich quick schemes.
Each of these can hamper your attempts to meet your savings dreams. By being aware of the common pitfalls, you will be able to get ahead of them and avoid falling into these traps.
How can you avoid these mistakes?
Naidoo recommends that you start small and make room for saving by adjusting your expenditure and spending less on luxury items.
“Include your savings as part of your monthly budget, and ensure they're not used for other purposes. You should also automate your savings by transferring them into a savings or investment account as soon as you receive your salary,” says Naidoo.
“Get more information on different types of savings and investment products. They offer different interest rates and benefits. The longer you save, the more your money grows. It would do anyone good to learn more about the benefits of compounding savings,” she explains.
Naidoo says a good aim is to have between three and six months of expenses saved in an emergency savings fund for unexpected life events.
“Try to increase the amount you put aside each month. It might take you two years or more, but stick to the plan and achieve your goal,” says Naidoo.
If you’re concerned about whether a financial services provider is legitimate, Naidoo suggests contacting the Financial Sector Conduct Authority (FSCA) on 0800 20 37 22.
“It takes time for savings and investments to grow, so schemes that offer you excessive interest rates over a short period might not be legitimate or registered,” she says.
Don’t let your debt get in the way of your savings. Start debt consolidation to get it out of the way.