The Savings Institute of South Africa has designated July as the annual “Savings Month” on the South African calendar.

The purpose of this initiative is to challenge consumers to strive towards living within their financial means and to reinforce savings habits.

Research has shown that almost 70% of South Africans are not committing to any form of saving and that many others who do save, start too late.

Only a very small percentage of people have the drive to set savings goals, therefore, meeting with a financial adviser could change your life for the better.  By simply understanding the value of adopting continuous saving habits might be enough to change your behaviour completely.

If there is ONE thing that lockdown has taught us, it is that those with cash available, are much better off than those who live pay check to pay check.  The basic approach to this is the importance of an emergency fund.

Those who were affected by a decreased income during lockdown, and had a fully funded emergency fund in place, were in a much better position to survive lockdown financially.

The effect of having a cash buffer is even more far-reaching than this. Cash in hand always puts you in an advantageous position.  Consider this example:

You hear of someone who is in financial distress due to lockdown and urgently needs to dispose of an asset that you badly desire (a Harley-Davidson Road King would be perfect to describe my personal view on this). You are in the perfect position to buy that asset at a highly discounted price, seeing that you can offer him cash in hand.  Unfortunately, if you disagree with me on this due to “ethical” reasons, someone else will simply take up the cash offer and disappear on the horizon with that asset you so dearly dreamed of.

The South African Savings Institute (SASI) has set out a few tips that could be of help if you decide to set your mind to establishing a healthy savings habit:

1. Set a target

The reason why many of us do not save is because we have never set saving goals. It is important to set and write down important savings targets such as an emergency fund, a holiday fund and other targeted savings.

2. Automated savings

Debit orders to savings accounts allow automated saving. This is an effective way to prevent you from wasting money on anything else. You can set up debit orders for Tax-free Savings Accounts (TFSA) or a Unit Trust Account.

3. Your 13th cheque

Ask your payroll manager to save for a 13th cheque, paid to you in December, by lowering your salary. This extra pay cheque will allow you to ride out the festive period and expenses in the New Year without these having a major impact on your finances.

4. Pension fund contributions

When starting a new job, ask your employer to default to the highest allowable retirement fund contribution percentage of your income. You can also ask your employer to review your current contribution. The best part of it all is that all retirement funding contributions are tax deductible annually up to R 350 000.

5. Financial Wellness days

Ask your employer to give mandatory time off to review your finances with a financial planner once a year. Regular meetings with your financial adviser will help you remain in control of your finances.

6. Savings buddy

Allow your spouse, partner or friend to be a savings buddy whom you meet with regularly to discuss your savings journey. By holding each other accountable, you can help each other to grow in your wealth.

7. Children

Open Tax-Free Savings Accounts for your children to maximize the benefit they receive from these accounts. Set up debit orders to contribute to these accounts as they grow up, together with cash gifts they receive on birthdays and other occasions. You can encourage grandparents and other family members to also contribute regularly to such an account.

8. Domestic help

Set up a savings account or retirement annuity for your domestic helper. These important members of our families are often forgotten in future and financial planning.

9. Retirement fund statement

By receiving your retirement fund statements monthly or quarterly, you can be encouraged to keep track of your savings. This way of monitoring ensures that keep a close eye on your growing investment to ensure you have sufficient income when you retire.  It is important to discuss this with your financial advisor, as he or she needs to recalculate your figures.

10. Financial products and insurance

Finally, by meeting regularly with your financial adviser, make use of the financial products available to FIRSTLY protect your wealth, as well as build your wealth.

At Opulentia Financial Services we will gladly spend time with you to assist in setting the right savings goals.  We want you to build wealth, prosper and live comfortably. And maybe even ride that Harley-Davidson into the horizon…

Written by Pieter Venter, financial advisor at Opulentia Financial Services. With extracts from SASI and Counting Coins.