I’m not good with money. I don’t understand interest. I wish I knew how to save.
These are some of the things young people said when asked about their attitude to saving, and what they were doing to ensure they had a little something in the bank.
Emphasising the importance of developing one’s financial savvy, particularly as we mark National Savings Month in July, Ester Ochse, product specialist at FNB Wealth and Investments, advises that “saving and investing should form an important part of your goals and money management journey”.
Someone who has taken that important first step is Nonelwa Xego, 21, of Philippi, who opened a savings account” because my parents advised me to get one”.
“I thought it was lame at first but the older I got, I started to warm up to the idea,” says Nonelwa. “Personally, I don’t know how interest works but I have heard that some banks have better offers than others. I save because I want my money to accumulate, and I have not decided on what I want to spend it on.”
While Norman Koaesa, 23, of Langa, also has a savings account, he has found it difficult to keep it active because each time he saves “responsibilities arise”.
“It has not been long since I decided to have a savings account and it has been difficult to keep it open. Responsibilities arise every time I think that I am catching a break,” he says.
“Nobody advised me to get one. I just thought that it would have been a smart move. I am a student so the banking fees are not too bad and I am not crying about it. I just wish I knew how to save money effectively.”
Nomusa Madlala, 17, of Durbanville, however, says she is not good with money and doesn’t have a savings account “because I never have money to save”.
“I do not have a savings account and it’s not that my parents never tried talking me into getting one. The problem is that I am just not good with money. The one minute I have it and the next second, I don’t. Having a savings account at this point in my life would be useless because I never have money to save.”
Despite their differences, the one thing all these young people had in common was that they did not know what they spent their money on and usually didn’t have anything to show for it.
Founder and director of African Unity investment company, Herman Lombard, says to prevent these “money leaks”, you should work with a written budget every month.
He advises young people to try the 50-20-30 rule, where 50% of their income goes to rent, utilities, groceries and transportation costs; while 20% goes to savings, investments, and debt; and the other 30% towards instant gratification, being the things that you don’t really need but want.
And, ads Ms Ochse, you should regularly revisit your financial goals and check on your progress.
If you find you’ve gone off track, you can implement the following to improve your performance:
* Record your expenses
Keep track of all your expenses, from that cup of coffee, lunch at work, data and airtime. This initial step will help you see how much you spend and will give you an indication on where you need to reduce. This will help you free up some funds which can be channelled towards your savings.
* Review your bank statement
Spend time looking at your bank statement to see where you need to cut expenses. This will need to be done with great attention as it will help you identify areas that may be causing the monthly expense leakage. Once you have identified the leakages, you need to act immediately to allow more funds to be channelled towards meeting your financial goals.
* Review your budget
Once you have the data from recording your expenses and reviewing your bank statement, you need to relook your monthly budget and amend it in a way that will enable you to meet your goals faster.
* Contribute extra
When finances allow, it is advisable to contribute extra towards your savings. This will help you meet your savings goal earlier.
“Constantly reminding yourself about what you are saving for will encourage you to continue saving. Factor in your savings goal into your monthly budget to ensure that you make adequate contribution to be able to meet your goal,” says Ms Ochse.