The world is abuzz with Prince Harry and Meghan Markle’s decision to find independence and build a life of their own outside of their royal trappings.
What does this mean for everyday men and women like yourselves? Not much. Harry and Meghan will be just fine regardless. But, as a new year and a new decade blooms, it is their move towards “financial independence” that should get South Africans thinking about their own financial health.
Financial Planner at Momentum Financial Planning, Ernest Zamisa, says South Africa has a poor savings culture. “The problem is that while there is enough information out there, there is certainly not enough education. South Africans are seldom willing to turn saving into a dinner table conversation.”
Zamisa believes too many of us do everything for show and not for sure. “We are not sure if we are financially safe, but we do everything to show that we look like we are. The first step to being sure, is being secure,” he says.
Financial independence should always begin and end with security. One needs to be secure in what one is aiming to accomplish when it comes to saving. Zamisa says the first thing you need to do is set two financial goals. One for the end of the year, and one for the end of the decade.
“Once you know what you want to achieve you can start asking yourself the simple questions. How much do you earn? What are your expenses? And how much are you willing to allow yourself to spend on things you enjoy? As an adviser, I always tell my clients that one should save at least 15% of their monthly income, which should be divided into various savings funds based on their savings objectives.”
Zamisa says that the first savings fund you need to look at is your emergency fund. This is the place where, should something happen, you have quick access to cash. A rainy day is always around the corner and will come when you least expect it. Hence, an emergency fund is so crucial in the pursuit of financial security.
“A simple money-market account should be sufficient as an emergency fund,” says Zamisa. “It is accessible and takes advantage of compound interest.”
For long-term savings, the impact of compound interest plays a larger role. Retirement planning hinges on the idea that your money will make money for you at the end of day, so much so that the monthly interest alone can act as a form of income as you celebrate your golden years.
Mid-term savings, is something that too many South Africans tend to overlook. This is why Zamisa advises having a ten-year goal.
“It’s not just about putting money away because you want to have money. What is your goal? Do you want to buy a car? Put a down payment on a new house? Fund your child’s education? Start your own business? These are all respectable mid-term savings goals that one can achieve with the right focus and discipline.”
If you are worried about your ability to save, there is no shame. There are plenty of people who can help. “When you are sick, do you not go to the doctor to seek treatment?” asks Zamisa. “A financial adviser, is someone who is well versed in financial matters and can help you get on the road to financial health.”