How to cultivate a savings mindset

Most of us fear poverty, but few make the connection between saving and ongoing financial stability.

Your ability to save can mean the difference between a comfortable life and a difficult one – but is it possible to cultivate a savings mindset if you’re not good at putting money away? We investigate.

Tip: Getting into the habit of saving and investing can put you in a solid financial position in the future.

The need for savings

Whether you’re saving for an emergency fund, a specific goal like a honeymoon, or even your golden years, putting money aside for the future is crucial.

However, you can only save as long as you’re earning, notes financial planner Sylvia Walker, author of Smartwoman: How to Gain Financial Independence and Create Wealth.

“Never underestimate the value of a regular income and how it empowers you to save and invest. You don’t earn forever, though, so be prepared,” she warns.

Cultivating a savings mindset

Cultivating a savings mindset requires identifying savings goals. “As Simon Sinek notes, when you start with your ‘why’, everything else will follow,” says Thami Cele, head of savings and investments at Absa.

“You need a sense of purpose to become consistent about saving and stick to your plan. Without this discipline, you’ll go the way the wind blows and live from day to day.”

Being SMART about your goals

Goal setting and budgeting are “powerful tools”, notes Cele, for ensuring consistency and success.

Rita Cool, head of individual consulting strategy at Alexforbes, says that SMART goals – those that are specific, measurable, achievable, relevant and time-bound – are a good place to start.

“Saving is much like losing weight – both require goal setting and commitment. Having a specific goal gives you focus, comes with a reward, and helps to ingrain a saving habit,” says Cool.

Goal and reward

We’re all told we need to “save for retirement”, but that seems boring or unconnected to our present selves, says Cool. “However, setting goals such as living-debt free after the age of 60 provides more of an incentive.”

She says short-term goals are easier to achieve. “Once you’ve accomplished those, you’ll see the value of saving for larger rewards.”

Walker recommends setting a goal, understanding how much money is needed to achieve it, then looking at your timeline and working out how much you’ll need to save. Flexibility is needed, however.

“Extend the timeline if necessary – for example, you may need to save for three years instead of two to afford a deposit for a home,” she says. “Also, don’t set unrealistic goals, as these could lead you to give up after a few months.”

Tips to help you save

The following recommendations will kick-start your savings drive.

Get out of debt. It won’t help to get a 12% return on your savings if the interest charged on your debt is set at 25%, says Cool. However, if you’re in perpetual debt, saving a small amount, such as R100 a month, can help you build up a reserve and regain control.

Start with what you have. We don’t all have a lump sum to start with, so save what you can when you can, says Walker. Consistency is key.

Automate your savings. If you’re likely to spend money as soon as you receive it, set up a stop order from your salary. “Direct the funds into a separate savings account you can’t access easily. Protect your money from yourself, if needs be,” Cool recommends.

Trim the fat. Saving isn’t just about putting money aside, but actively managing your money. “You don’t have to be frugal – just be aware of where your money is going every month,” says Cele.

Adopt new behaviours. It’s not easy to change when you’re an adult, says Cele, but if you’re intentional about money management, you can change your destiny.

“If you earn R100,000 a month but don’t save, you may have greater money stress than someone who earns R10,000 but has more self-control and is good at stretching their rands to make them last longer.”

Tip: Is debt holding you back from saving? Consider debt consolidation.