Move from financial vulnerability to prosperity
● Financial vulnerability is the greatest challenge that women face today. Women often experience gender bias in the workplace; they receive less pay than their male counterparts, take time off or pursue careers less aggressively than men because they are balancing their roles as employees and mothers.
In addition, many SA women face the challenge of being single parents.
As Savings Month comes to an end and Women’s Day approaches, it is appropriate that we focus on financial habits and how to move from financial vulnerability to prosperity.
Although we cannot predict the future, we can prepare for uncertainties by saving for emergencies and goals to reach financial freedom. Ideally, we should be setting money aside for when life happens and to avoid going into debt and incurring expensive interest to pay for unplanned expenses.
Savings should also be set aside for planned expenses rather than buying on credit — that way you harness the power of compound interest to work for you rather than against you.
The increase in VAT and higher fuel prices are putting financial pressure on South Africans who are struggling to make ends meet, but that does not mean you can’t save. You don’t have to be earning a lot to start saving.
To save you just need to spend less than you earn. Saving may be as easy as giving up on spending for pleasure to save for a goal such as an emergency fund, towards a child’s education or for a family holiday.
Cutting back on pleasure spending may not be as painful as one thinks. It could be as simple as forgoing certain expensive brands or cutting back on a cup of coffee a day — you could be saving up to R175 a week or R700 a month.
If you invest into a Capitec flexible savings account you will earn approximately 4.85% interest that is above the current inflation of 4.6%. It is important to save more than inflation to ensure that you grow your savings. (Inflation measures how the cost of living rises over time and the buying power of your rands.) You could earn an even higher interest of between 7% and 9.1% if you invest into a fixed-term savings account for a fixed term of your choice without access to the funds to ensure preservation.
If starting a savings account is something you mean to do but keep putting off, remember that smartphones make banking and savings so much easier.
More than 38 million South Africans (67%) own a cellphone, according to global digital agency We are Social and social media management platform Hootsuite.
“The first prize is to use banking apps,” says Francois Viviers, marketing and communications executive at Capitec Bank. “Apps have become the most convenient way to bank — they save both time and money.”
At Capitec you have the option to open up to four savings accounts and name them according to your different savings goals to keep you motivated and committed. As an example, you could name one savings account Emergency Fund and another Education to save for your child’s school uniforms and books.
So saving could be as easy as a click of a button. When saving, there are some important steps to remember.
STEPS TO FINANCIAL FREEDOM
1. Draw up a monthly budget so that you know where your money is going to each month. This helps you to identify where you can cut costs.
2. Stay in control. Identify the biggest threats to saving, such as short-term debt. Pay off the debt that costs you the most in interest, such as store cards.
3. Arrange automatic deductions from your bank account so that you’re committed to saving every month, even if it’s only a small amount.
4. Set tangible, realistic goals for which you want to save.
5. Save towards an emergency fund. This will avoid you having to go into debt if the unexpected happens. Keep emergency savings in a separate account so that you are not tempted to use it. It is advisable to save three to six months’ salary to help provide an income if you fall ill and are unable to perform your job, for example.
6. The returns on your savings should exceed inflation to ensure that the buying power of your rands is not eroded.
7. Protect yourself against a loss of income due to death or disability or a critical illness. Income protection is a very important part of being financially empowered to help cover unexpected costs.
8. Plan for mid-term goals such as saving towards your child’s education.
9. Consider your long-term goals. Saving money for retirement is the most important. The advantage of saving over the long term is that you can take advantage of compound interest where you earn interest on the interest already earned. This has an exponential effect on your savings.
10. Draw up a will to distribute your assets to your loved ones and pay your liabilities when you die.
Apps are the most convenient way to bank
Francois Viviers
Marketing and communications executive at Capitec Bank