You know the importance of saving money, but perhaps when it comes to starting your plan, you do not know where to find the money or where to invest it?
Maybe this is why you have never started an investment?
If you have money in reserve for a rainy day, your child's education, that dream holiday, your child's dream wedding or your retirement, YOU are better protected,
YOU are better covered and best of all, YOU are in control!
It does not matter what your savings are worth, if you die or are disabled, leaving your family with insufficient income!
Your first priority is to create a savings account with 5 to 6 months worth of your living expenses.
Money you can Immediately get to, should you need to.
This will help prevent you having to use your investments and affect their future value.
Our greatest savings goal is a comfortable retirement, so you need to try and save the maximum you can in either your company pension plan or your own Retirement Annuity.
Forego 1 daily cappuccino at R8.50 and invest it.
Assuming a return of 10% per year you'll have over R317,000 in 25 years.
Increase that by the annual rate of inflation (8%) and you'll have over R642,000 in the same time.
So you need to compensate your savings to meet the threat of inflation.
Every year, you should increase the monthly amount you save by at least the inflation rate.
That way you cater for the effect of inflation and make your future money worth something.
In order to be able to use your money at short notice, you should not commit to a long-term plan such as an endowment or unit trust.
These investments have costs and it takes time to recoup these expenses. Ideally your savings should be in a bank. The best product with a bank is a Money Market Account or Fund.
But, they do require quite high minimum balances. Whilst you are saving towards that minimum balance use a normal savings account.
Bank accounts return interest and that is added to your total income for tax. Do not be too concerned as SARS have given us reasonable deductions from income tax, for interest earned.
You need a fairly large amount in savings accounts before you are liable for tax. Check with a tax adviser if you are concerned.
Medical aid pays healthcare costs.
What if a disability STOPS your income?
Last update: April 13, 2021
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