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Financial independence starts here: The power of saving while single

10 July 2024 Momentum Financial Planning

As a young South African, it’s easy to feel overwhelmed by the constant pressure of financial responsibilities. With inflation rising and interest rates climbing, saving money can often seem like a luxury reserved for the well-off.

According to Leonie O’ Connell, financial adviser from Momentum Financial Planning, however, saving while you’re single is about much more than just accumulating wealth – it’s about securing your financial future, preparing for life’s uncertainties, and achieving your personal and financial goals.

“One of the key benefits of saving early is the development of crucial financial skills,” O’ Connell explains. “Learning to manage your money wisely, budget effectively, and prioritise your spending helps build a solid foundation for financial stability and independence. These skills reduce stress and lay the groundwork for a secure future, no matter what life may bring.”

The financial landscape for young South Africans is particularly challenging. Experian’s Consumer Default Index (CDIx) for the first quarter of 2024 revealed that young people account for 16.4% of credit-active South Africans, with a high bias towards retail credit. This trend highlights a dependency on retail and clothing store credit, which can lead to long-term financial difficulties.

Additionally, the Momentum Unisa South African Wealth Index Q4 2024 revealed that an estimated 51% of households are in a negative wealth position, meaning their outstanding debt exceeds the value of their assets.

She also warns young people of the risks associated with credit dependency. “The consequences of not borrowing wisely can be severe, with negative listings on credit profiles lasting for years. A poor credit profile can hamper access to future credit and even affect employment opportunities, particularly in the financial services sector.”

She says saving money while you’re young isn’t just about safeguarding against financial pitfalls; it’s also about achieving your personal and financial goals. Whether you dream of travelling, buying a home, starting a business, or furthering your education, having a savings cushion can make your dreams a reality. By prioritising savings now, you can build a future that aligns with your ambitions.

O’ Connell recommends these practical tips for saving:

• Create and update your budget: A budget can help you keep track of your income and expenses, but it is also important to update your budget often. This will help you identify areas where you can cut back and save more.
• Set clear goals: Having specific savings goals can motivate you to stick to your budget and make sacrifices when necessary.
• Automate savings: Set up automatic transfers to your savings account to ensure you consistently save a portion of your income.
• Seek financial advice: Don’t hesitate to consult with a financial adviser to develop a personalised savings plan that suits your needs.

She says saving while you’re young is a powerful step towards securing your future and achieving financial independence. By developing good saving habits, you can navigate the challenges of today’s financial landscape, reduce stress, and lay the groundwork for a prosperous life.

“Remember, your future is in your hands. Kickstart your journey to success today and protect your lifestyle and income for tomorrow,” O’ Connell concludes.

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