‘Can’t afford to save’ is not an excuse

Two of the main reasons people aren’t using tax-free savings accounts is that they don’t know about them, or they don’t know enough about them, and they believe they do not have enough money to save. But committing to saving is often a matter of getting your priorities right.

Didintle Mokonoto, a financial adviser at Alexander Forbes Financial Planning Consultants, who holds the Certified Financial Planner accreditation, says anyone can save something, no matter how little they earn.

She says the key is to save before you spend. “If you save a portion of your income as soon as you get paid, you won’t have a chance to miss it, and you’ll be free to spend the remainder on your needs and wants, with less anxiety about the future.”

Saving regularly is a great way to pay for expensive items that you may not be able to afford immediately, such as a car, holiday or wedding.

“You could use your credit card to pay for these ‘want items’, but this will end up costing you more because of the interest payable.” It can also lead to debt problems if you don’t manage your repayments properly, Mokonoto says.

When you save, the compounding effect of the interest or returns you earn works in your favour, but when you borrow, the interest compounds in favour of the bank or loan provider.

Mokonoto says people make excuses, such as: “I’ll save when I get an increase, when I get to a certain age, when I sign that big deal, or when I’ve paid my car off.” But these excuses will not motivate you to start saving.

Saving and budgeting go hand in hand. If you learn how to budget appropriately, you will know that every month a certain portion of your income is going to your savings, Mokonoto says.