Save to­day and at­tain fi­nan­cial free­dom to­mor­row

Talk of the Town - - News -

NA­TIONAL Sav­ings Month re­minds in­vestors each July of the im­por­tance of sav­ing. How­ever, sav­ings habits – once in­grained – need to be main­tained through­out the year.

Us­ing the power of com­pound in­ter­est – just make a start!

We all know we need to save, but per­haps the most im­por­tant point is to start sav­ing as early as you pos­si­bly can (or just start now, if you haven’t al­ready!) in or­der to let com­pound in­ter­est work in your favour.

Al­bert Ein­stein once said, “Com­pound in­ter­est is the eighth won­der of the world. He who un­der­stands it, earns it … he who doesn’t… pays it.”

Sticks Stiglingh, San­lam fi­nan­cial plan­ner at Strata BlueS­tar Fi­nan­cial Ser­vices in Port Al­fred, said that Glacier by San­lam sup­ports in­vest­ing for the long term, and shares an ex­am­ple from Glacier that high­lights how, by start­ing to save ear­lier, com­pound in­ter­est can work in your favour:

Per­son A saves R100 a month for 40 years, from age 25 to age 65.

Per­son B waits un­til the age of 45 and there­fore only has half the amount of time to save, i.e. 20 years (from age 45 to 65). Per­son B will have to save R850 a month, i.e. 8.5 times as much as Per­son A, in or­der to ac­cu­mu­late the same amount of money as Per­son A at age 65. Long-term sav­ings

In­vestors who are liv­ing off a salary now may find it dif­fi­cult to com­pre­hend hav­ing to live off their sav­ings when they even­tu­ally stop work­ing. It is im­por­tant to re­alise that this “sec­ond salary”, or your re­tire­ment in­come, is es­sen­tially the salary you’ll be pay­ing your­self in re­tire­ment as it is based on your own sav­ings through­out your work­ing ca­reer.

It is im­por­tant to note that when it comes to long-term sav­ings, a re­tire­ment an­nu­ity is not the only ve­hi­cle avail­able to save for re­tire­ment. In­vestors who are dis­ci­plined enough (and not tempted to dip into their funds in the short term) can also use tax-free sav­ings ac­counts, unit trusts and en­dow­ments as re­tire­ment sav­ings ve­hi­cles, af­ter hav­ing made use of the tax ben­e­fits avail­able on re­tire­ment an­nu­ities.

Many peo­ple, par­tic­u­larly the younger gen­er­a­tions, tend to de­lay in­vest­ing due to be­havioural bi­ases. The (false) ra­tio­nale is usu­ally, “I will save when I have enough to save.” How­ever, the ben­e­fits of long-term com­pound­ing can­not be high­lighted enough – your sav­ings need time to grow.

In con­clu­sion, Sticks re­it­er­ates that the most im­por­tant point to re­mem­ber is that it is not how much you save, but rather for how long you save.

Con­tact Sticks Stiglingh on (046) 624-4948 / 071-612-7339 or

San­lam is a Li­censed Fi­nan­cial Ser­vices Provider.

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