For many people, the idea of saving is something that they fear they can’t achieve especially during these trying times. Financial challenges such as loss or reduction in income and rising cost of living inhibit our ability to save. However, small, gradual changes in how you manage your day to day money matters and how you think about money, can result in positive savings behaviour.
Dhashni Naidoo, FNB Consumer Education Programme Manager says, “Savingrefers to putting aside money regularly for different purposes. To help you achieve different goals – saving for emergencies, education, retirement or to buy goods. The act of putting money aside every month requires determination and discipline. And choosing the right savings product to match your saving goal is important. Saving, even small amounts, is important for our financial wellbeing and resilience.”
Naidoo shares 5 steps on how one can start saving:
- Decide on a savings goal and commit to a plan – The first step is to determine what you are saving towards. There are many reasons people save for example, saving for emergencies, education, retirement etc. Different banks and financial institutions have different ways and tools to help you on your saving journey.
· Calculate how long you need to achieve your goal – Once you have decided how much you want to save, you need to determine how much you can put toward your goal each month and divide this amount by the total amount you need to save. This will then determine how long it will take to achieve your goal. Goals must be time bound and we need to adjust current spending patterns in order to free up cash to meet the goals. To achieve your financial goal, you need to be disciplined and stay focused. Always be specific and practical with your goals.
· Pay off your debt quicker – Paying off debt sooner will save you money and free up cash to save. Paying a little more toward your debt can reduce your payment terms and you can finish paying it off quicker. Once your debt is paid off redirect those funds towards savings.
· Control spending by reducing your expenditure on wants – Reduce your spending on non-essential items or luxuries. This requires discipline in order to readjust our spending behaviour. Make a list of those things you do not need and are nice to have. Then decide which of these you are going to give up and then save that money in an appropriate savings product.
· Automate savings – Once you have freed up cash from paying off debt sooner and reducing spend on non-essential items, you need to ensure the money is transferred to savings products. On a monthly basis you should ensure money is transferred on pay day to ensure you do not spend the money.
“Changing your spending behaviour and attitude can go a long way to help you achieve your savings goals. Having financial goals is important as it will help you break your goals down to groups of short, medium and long-term goals. A more practical and manageable approach could make your saving journey a lot less overwhelming. It is also important that your financial adviser or bank matches your savings goals into a suitable financial product. For example, if you are saving for an emergency fund you need a financial product that is easy to access unlike a 32-day notice bank account, as different products fulfil different financial needs, the key is to ask questions and be clear on what you are saving for and how long you want to save for,” concludes Naidoo.