Why is saving and investing important?

Saving and investing are crucial for financial security. Saving money builds emergency funds, while strategic investing grows wealth over time. Both help achieve long-term goals, like retirement and financial independence. They provide a safety net and opportunity for future prosperity.

What is an investment strategy?

An investment strategy encompasses a plan to achieve financial goals through thoughtful allocation of resources. It typically involves assessing risk tolerance, setting objectives, diversifying investments, and regularly reviewing to ensure it tracks with financial plan. Strategies may vary based on factors such as investment period or time horizon, desired returns, and individual circumstances, aiming to maximise growth while managing risk.

When should I start saving and investing money?

Start saving and investing as early as possible. Even small amounts build discipline and create efficient habits. Early savings benefit from compound interest, significantly growing your wealth over time and providing a strong foundation for long-term financial security.

What are the best investments for young professionals?

Unit trusts are a great way to start investing. Collective investment schemes like unit trusts have a dedicated fund manager controlling the investment, and this can provide you with a softer landing into the world of investments. Endowment policies can also be a great beginning investment option, especially if your tax bracket is over 30%. Ensuring your investments are as tax-efficient as possible will also help grow your wealth in the long-term. A good financial advisor or tax specialist can guide you on the best structure for you.

Is paying off debt better than investing?

Paying off debt or investing depends on your financial position, and whether interest you earn on your investments exceeds the costs of your debt. But when repo rates are low, it might be prudent to cash in and service more of your debt so that you can use that money for investing and saving and growing your wealth. Ideally, you should structure your finances so you can pay debt, invest and save. This is where the 70/30 rule comes in.

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09 Jul 2024

Financial wellness: saving and investing made simple

When it comes to saving and investing, knowing where to start can be overwhelming. If you had a lump sum of money (say from a bonus, inheritance or a tax refund), would you know what to do with it? Whether you choose saving or investing, it’s important to know the difference and the role they play in your financial wellness and future.

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July is National Savings Month!

In this episode, Motheo takes the opportunity to chat with Thabiso Masiela, co-head of My Investments at Investec and René Grobler, Head of Investec Cash Investments, about saving and investing your extra cash.

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While the terms ‘saving’ and ‘investing’ are often used interchangeably, they differ in three key areas:

Protection:

Saving provides a safe place to store money with guaranteed capital, whilst with investing, you can expect volatility.

Growth:

Savings typically earn lower levels of interest, while investing has the potential for higher returns over time.

Liquidity:

Savings are usually accessible immediately or short-term, while investments are committed for longer periods.

What you do with your lump sum will depend on your personal circumstances and life stage. However, there are a few general guidelines to keep in mind:

Pay down high-interest debt: if you have any high-interest debt, it's wise to pay it down

René Grobler, Head of Investec Cash Investments

It sounds so unsexy to use your bonus to pay off debts. But if you start working out how much money you'd be saving on a monthly basis by not having that drag, that often is a bonus

Investec has created guidelines on how you can build your wealth in four key steps:

1. Set yourself up for success

Set yourself up for success by having emergency funds and liquidity for short-term expenses

2. Take advantage of tax benefits

Take advantage of tax benefits by investing in tax-free accounts and retirement funds

3. Build your legacy

Build your legacy through local and offshore unit trusts.

4. Diversify your legacy

Diversify your legacy with alternative investments like structured products and life investment policy (endowments).

To maximise your savings and investments, consider these key habits:

Start early: The younger you are, the more time you have to take advantage of compound interest. However, the second-best time to start is now.
Safeguard emergency savings: Keep your emergency savings separate from long-term investments to avoid dipping into them prematurely.
Pay yourself first: Set up a debit order for regular contributions immediately after your salary deposit.
Live within your means: Avoid the temptation to upgrade your lifestyle every time you receive a raise. Instead, increase your contributions to savings and investments.
Avoid premature withdrawals: Resist the impulse to withdraw from investments or change your strategy on a whim. Having an emergency fund in place will help you avoid cashing out during a crisis.
Stay focused on your goals: Be mindful of your financial goals and stay on track. Whether it's a comfortable retirement or not being a burden to your adult children, remember what you're trying to achieve.
Be honest with your budget: Set up a realistic budget and regularly review your finances. Bank statements never lie, so use them as a guide.
Stay informed: Stay knowledgeable about interest rates and returns. Compare similar options and consider consulting a financial advisor for extra peace of mind.

Remember, financial wellness is a journey, and with these tips, you can take significant steps towards a brighter financial future.

Good to know

Related questions

Why is saving and investing important?

Why is saving and investing important?

Saving and investing are crucial for financial security. Saving money builds emergency funds, while strategic investing grows wealth over time. Both help achieve long-term goals, like retirement and financial independence. They provide a safety net and opportunity for future prosperity.
What is an investment strategy?

What is an investment strategy?

An investment strategy encompasses a plan to achieve financial goals through thoughtful allocation of resources. It typically involves assessing risk tolerance, setting objectives, diversifying investments, and regularly reviewing to ensure it tracks with financial plan. Strategies may vary based on factors such as investment period or time horizon, desired returns, and individual circumstances, aiming to maximise growth while managing risk.
When should I start saving and investing money?

When should I start saving and investing money?

Start saving and investing as early as possible. Even small amounts build discipline and create efficient habits. Early savings benefit from compound interest, significantly growing your wealth over time and providing a strong foundation for long-term financial security.
What are the best investments for young professionals?

What are good investments for young professionals?

Unit trusts are a great way to start investing. Collective investment schemes like unit trusts have a dedicated fund manager controlling the investment, and this can provide you with a softer landing into the world of investments. Endowment policies can also be a great beginning investment option, especially if your tax bracket is over 30%.

Ensuring your investments are as tax-efficient as possible will also help grow your wealth in the long-term. A good financial advisor or tax specialist can guide you on the best structure for you.
Is paying off debt better than investing?

Is paying off debt better than investing?

Paying off debt or investing depends on your financial position, and whether interest you earn on your investments exceeds the costs of your debt. But when repo rates are low, it might be prudent to cash in and service more of your debt so that you can use that money for investing and saving and growing your wealth.

Ideally, you should structure your finances so you can pay debt, invest and save. This is where the 70/30 rule comes in.