Saving can seem scary to those who lack experience as the cost of living rises and people have less disposable income at their disposal, says Justin Asher, head of Marketing & Strategy at upnup.
But, as saving has become more accessible due to advancements in technology, it is time to take look at shifting South Africa’s savings culture to one that prioritises planning for the future.
“While saving helps you to tuck money away, the amount you save remains static. By investing that money instead, you’re better able to create and preserve wealth by making your money grow and work for you,” Asher said.
Here are some tips to help you as you dip your toes in the investing pool:
1. Plan your future goals
It’s vital that people are clear about why they are saving their money and what they would like to achieve by putting funds away for a later date.
Asher said: “Are you saving up to reach a specific goal like buying your own home or building a retirement fund, or are you setting cash aside simply to build wealth that you can dip into when you’re faced with sudden expenses or emergencies?”
2. How much you’re willing to save
"The next step is to take a realistic look at your finances and establish how much, or how little, you are willing to, or able to sink into each month,“ Asher said.
Doing this will also help people determine if they need to be looking at short-term or long-term options.
3. Evaluate your risk appetite
Some investments carry more risk than others making it important for people to decide how much risk they are happy with taking.
According to Asher, this will help identify what investment options are available to a person that falls within the margin of risk they are willing to accept.
This risk assessment can also help people decide:
– if they want to make investments at their own discretion (which carries higher risk)
– if they want to leverage digital platforms that help them determine which investments are a match for them (which carries medium risk), or
– if they would like to seek the assistance of a qualified financial advisor to guide them on selecting investments (which carries lower risk)
4. Looking for the right savings vehicle
Asher said that once an investor has determined what their objectives are for financial planning, how much they are willing to or can put away, and how much risk they are happy to take, they can choose the option that best suits their needs and capabilities.
“There are a number of types of saving and investment vehicles available to you such as stocks, bonds, cryptocurrency, and so much more. There are also emerging investment options available such as micro-investments, which allow you to consistently put away small amounts of money over time,” Asher said.
“As a first time investor, you can make use of resources like this investment risk ladder to help you identify where each asset class sits, based on their relative riskiness and potential returns.”
5. Don’t put all your eggs in one basket
Every investment carries a little bit of risk because of the volatile nature of the market therefore investors should be looking at putting their money into a number of different investments that have various ranges of risk and return.
Asher said, “If you’re not in a financial position to do so, you can help minimise your risk by stacking your investments. This means starting off with lower risk investments, which often carry lower yields of returns, and working your way up to more higher risk/higher reward investments as you become more financially savvy.”
IOL Business