Cultivating a savings habit pays off in the long term

The idea of saving for retirement, or even just saving in the current environment where every cent counts, can be daunting, but the first step is simply tracking your money to see how much is coming in and how much is going out. 

Speaking at a recent Money Cents webinar on Smart Savings, Kirsten Smit, an advisory partner at Citadel, recommended that you make a Sunday habit of reviewing your finances. 

https://youtu.be/voibSbS1REs?si=hOCRTAWobtnxUBX_

“Sit down with a glass of wine or tea, track your spending, and then tally it with where you want to be. Over time, as this becomes a habit you will start becoming more confident about your finances and that’s when the magic starts to happen,” she said.

Although there are several retirement-savings calculators available on various financial company websites, the numbers they spit out can be quite intimidating. 

John Manyike, the head of financial education at Old Mutual, said we often underestimate the psychological barriers to saving. “Very often, people are willing to save but they may have their own historical trauma around money or their mindset needs to shift,” he pointed out.

Farzana Botha, a senior communications manager at Sanlam Risk and Savings, said like anything else in life worth achieving, saving required discipline. 

“Discipline is not just a feeling, it is the alignment of all your energies towards something you really want. Just like you need to be conscious of your calories and maintain an exercise routine to achieve a certain fitness level, you need to track your spending and maintain a budget in order to achieve your savings goals,” she said.

When you decide to save, you need to commit to a goal and that automatically will give you a savings timeline. For example, saving for a fridge could be a short-term three-month goal, while saving for a holiday could be a one-year goal, saving for the deposit on a home loan could be a five-year goal and saving for your child’s education or retirement could be a 20- or 40-year goal.

Smit says when it comes to short-term goals, you want a low-risk savings vehicle like a bank savings deposit account or a money market account.

“When your savings timeline goes beyond six months, then you start looking at things like bonds, equities and property. These investments have a higher volatility, but being invested for longer means you can ride out the volatility,” she said.

Emergency savings