Essential financial habits for every life stage

Your wardrobe matures over your lifetime, and so should your financial behaviour. It’s essential that your saving and investment strategies, and your financial habits in general, adapt and evolve to align with your changing needs and goals. 

Kathryn Main, author and CEO of the Money Savvy brand, outlines essential strategies to implement at various life stages.

Tip: Debt can affect your financial and emotional health. Find out how debt consolidation can reduce this burden.

First, get the basics right

Main notes, “There are basic behaviours that every person, no matter their age, should take on”. These, she says, are as follows. 

• Create a monthly budget. A budget, however basic, will help you to better understand where your money is going - and where it needs to go. This will assist you in fulfilling the next step.
• Set financial goals. Consider what you want to achieve, and ensure your spending and saving habits align with this.
• Build a healthy credit record. This will enable you to qualify for a loan, should you need one - and at a better interest rate. 
• Create an emergency fund. Set up a separate account for this purpose, and consider a scheduled payment option.
• Start a side hustle. Consider how to generate an additional stream of income. Hobbies are often an ideal starting point.
• Diversify your investments. Spread your investments across a range of high-yielding financial products to mitigate the risk of loss.
• Talk to a financial planner. An expert can provide financial information and guidance, based on your specific needs.

In your 20s

Main stresses the importance of cultivating a culture of saving early on, and suggests you allocate 10% of your earnings to savings at this life stage.

“Starting to invest in your 20s is a good idea because you have time to make mistakes. You’ll also get the full benefit of compound interest,” she says.

In your 20s, you should:

• Develop good money habits
• Set medium- and long-term goals
• Set up an emergency fund
• Start saving for your retirement
• Build a good credit score
• Keep your financial literacy up to date

In your 30s

At this stage you may be considering marriage, children, and purchasing property. You may also start to earn more as you progress professionally.

“With increased income and responsibilities, saving becomes even more critical,” says Main. 

She advises saving up to 30% of your income, or more, if possible.

“When investing at this stage, aim for a mix of high, medium- and low-risk investment types,” she advises.  

In your 30s, you should:

• Ensure you and your partner share similar financial values
• Have an exit plan to protect your assets if your relationship breaks down
• Ensure you are financially prepared for medical expenses. If you can’t afford medical aid, consider creating a savings account exclusively for medical expenses.
• Start estate planning. This is especially important if you are married and own property.
• Take calculated investment risks
• Save for your children's education

In your 40s

At this stage, you may be juggling a career and children, and caring for ageing parents. 

“Low-risk investment is recommended, as there is less time left for making money,” Main explains. 

In your 40s, you should:

• Ensure your will and estate are up to date
• Ensure your retirement funds and investments are sufficient
• Continue to take calculated investment risks
• Continue saving for your children’s education
• Maximise tax-free savings account contributions
• Use funds from tax deductions to invest in income-generating assets

In your 50s and 60s

This life stage should be accompanied by strategies for “living with less”, and planning for your retirement.

In your 50s and 60s, you should:

• Settle your debt, including home loans
• Use a retirement calculator in order to plan accurately
• Maintain a diversified investment portfolio in low-risk products
• Ensure your will and estate are up to date
• Prioritise health insurance for you and your spouse or partner
•  “Live with less” – stick to your retirement budget and do not dip into your savings

It’s essential to ensure that your money habits align with your changing financial needs. By regularly evaluating your current life stage, you can make meaningful changes to ensure you remain financially secure. 

Tip: A retirement annuity can provide the foundation for a guaranteed income stream later in life.