Why is there so much pressure to save money?
If you don’t earn much and you can barely pay your bills, the idea of having to save money might seem impossible.
If you have enough to pay for everything you need, why should you worry about putting any aside each month? Every one of us has lain awake in the early hours of the morning at least once, wondering how they were going to afford something they needed? Next month’s rent, how many months could I pay the bills for if I lost my job, how am I going to pay for my kids to go to university or college, do I have enough money to retire?
Everyone has to start somewhere, and if you work at it, your financial situation is likely to improve over time. Saving money is worth the effort. It gives you peace of mind, it gives you options, and the more you save, the easier it becomes to accumulate additional savings. As you accumulate savings, your financial worries should diminish, as long as you’re living within your means. The more money you have saved, the more you control your own destiny. Knowing that you have options because of the money you’ve put away can give you even more peace of mind. The reduced stress from having money in the bank frees up your energy for more enjoyable thoughts and activities.
Money doesn’t solve every problem.
It you are retrenched or lose your job, it might take as long as two years to find a new job. Some illnesses won’t go away no matter how many procedures you can afford, and random crime can happen even in a supposedly secure gated community. But with more money in the bank to deal with issues like these, you give yourself better odds of coming out on top.
The easiest way to get your savings working for you is to set things up so that you automatically add a little bit each month to your savings. That way you won’t have to remember to make the payment and you won’t be tempted to skip a month. The best time to put a bit of money aside is just after you’ve been paid, so set up your standing order to go out on, or just after pay day. The ideal is to put aside at least 10%, but start with an affordable amount, R500 or R1000 and gradually increase it every 3 months. As your savings build up, they’ll grow faster– even if you’re only paying in the same regular amount. This is because each time the interest earned on your money is paid into your account it starts earning interest too. This interest-on-interest is called compound interest, and over the longer term it makes a big difference to how much your savings are worth.
Start a savings culture with your children as soon as possible.
They can take 10% of their monthly allowance and put it into a savings account. I have an arrangement with my own children that I will match their savings amount every 3 months and deposit that into their savings account as an additional amount, so they double up their savings 4 times a year,
It is important to have an emergency fund set aside to cover unexpected expenses. Ideally your emergency fund should be about three to six months of your expenses. Once you are out of debt, you should work on bringing your emergency fund up to between six to twelve months of your income.
Different people save for different reasons. It makes saving easier if you have a clear goal or purpose for the money you are saving. Examples of these goals will be for setting up an emergency fund, retirement (10% to 15% of gross income), deposit on a new house, overseas trip, to purchase a car with cash or unexpected repairs or renovations.
Saving money is incredibly important.
It gives you peace of mind, expands your options for decisions that have a major effect on your quality of life and eventually gives you the option to retire.
Good luck in investing in your future!