5 Tips you should know before you start saving

Most of us learn about saving through trial and error, which can lead to costly mistakes. We provide five tips to consider before you start saving in earnest.

Tip: It’s never too early to start saving for your retirement. Explore investment products today.

1. Start early

By starting your savings journey early on, you will give your money ample time to increase. Thanks to the power of compound interest, even the smallest amount will add up over time.

“Start small - even R100 a month will help. As you develop the discipline, you will be inspired to save more when you can,” says Anthea Gardner, managing partner of Cartesian Capital and author of Make Your Money Work For You.

“Almost everyone thinks they don’t have enough money to save at the end of every month, but your savings (or paying yourself) is the most essential part of your budget,” she says.

2. Create a budget

A budget will help you identify where your money goes, where you can cut back, what you need to prioritise, and how much you can afford to save. There are many free budgeting apps and online resources to guide you through the process. 

3. Set up an emergency fund

An emergency fund is a separate savings account for unexpected expenses, such as car repairs or medical bills. These funds act as a financial safety net. They will give you peace of mind and help you to avoid going into debt when unforeseen expenses crop up.

Sam Beckbessinger, author of the book series Manage Your Money Like a Grownup, notes that an emergency fund should cover at least three months’ worth of expenses. She refers to this fund as a “financial cushion”. 

4. Invest your savings in a financial product

Investing your savings in a financial product is vastly preferable to using a regular savings account, as these products are far more likely to yield inflation-beating growth. There are many different types of investments, including unit trusts, stocks, bonds, commodities, and real estate, so it’s a good idea to consult with a financial adviser, who can help create an investment plan that’s right for you.

According to Gardner, it is wise to use the “Rule of 72”.

“If your money is earning 10% per annum, it will take you 72 ÷ 10 years to double your money –  that is 7.2 years (assuming you do not withdraw any of it at any stage),” she explains.

5. Don’t be afraid to ask for help

Saving money can be challenging, especially if you're unsure where to start. Many resources are available, including consumer finance websites, online forums, and personal finance books.

There is a wealth of free material, but ultimately, it's wise to seek professional financial advice before embarking on your savings journey.

Starting to save early on will allow you to take advantage of compound interest. Open an investment account today.