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Saving Is For The Birds

16 July 2024 Momentum Investo
Andile Jonas

Andile Jonas

Andile Jonas, Head of Marketing at Momentum Investo, shares what he has learnt about ornithology in financial services.

Saving is for the birds. How I wish that is what I could tell myself, my wife and my kids. Sacrificing part of your income for whatever worthy cause, even retirement, means you give up something you could have enjoyed now. And are we not in a community that thrives on having a good time?

But my wife and I are not common cuckoos. We can’t pass on our children to another bird’s nest and trick them into bringing them up. A handful as they are, we love our kids too much. So, we take responsibility for our choice to have children. We’ve saved to send them to decent schools and hope they will consider a tertiary education. Or, if that is their choice, it would be great if we could give them a head-start if they prefer to get some experience and then become entrepreneurs.

Our actuaries at Investo have made calculations that show that a child being born this year may cost their parents up to R3 million by the time they have finished their studies. I’m glad my children are a bit older, but if you start saving early, so much more is possible.

The table below also illustrates that the early bird indeed catches the worm. In fact, if parents start saving today, they will pay effectively half the cost of tertiary education.

The total cost of a three-year degree in 18 years’ time is expected to be around R660 000.
Yes, by the time your child goes to high school, you will earn a bigger salary, but contributing R870 a month is much softer on my ear than a whopping R8 200.

The scary part is if you don’t start saving for that degree at all. You will then have to fund it with a student loan at a prime interest rate of 11,25%. By starting to save now, you will save yourself R774 800 by not having to take out a loan. That’s the price of a house.

When you start saving

Contribution required

Total contributed

Savings on cost of tertiary education

(R660 000 minus total contributed)

Savings on cost of student loan

Now

R870

 R322 000

 R338 000

 R774 800

In 6 years’ time (start of primary school)

R2 000

 R413 000

 R247 000

 R683 800

In 13 years’ time (start of high school)

R8 200

 R558 000

 R102 000

 R538 800


I want to repeat: The early bird catches the worm. If you start saving early, also for your retirement, you have to put away so much less. A little amount over a long time goes much further than a big amount over a short time. It sounds crazy, but it’s true. And if you postpone saving that little amount, the bigger amount you will need just gets bigger and bigger and more unaffordable. And for retirement, you can’t take out a loan. It’s that simple.

The beauty of long-term savings is based on a principle called compound interest. Best is to think of it as a ball of clay rolling and gathering more clay and getting bigger as it rolls on. It’s not just your original amount that gathers clay, the interest that you’ve earned means your ball gathers more and more clay as it gains momentum.

It’s time to take the leap of faith. According to the website birda.org, barnacle geese chicks, at just one day old, will throw themselves out of the nest on a rocky outcrop to avoid predators. The biggest predator we must avoid is inflation. Let’s not give that eater of hard-earned savings a sporting chance at getting its clutches on our nest eggs.

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