1 Set goals 2 Start today
Whether saving for a vacation , a house or retirement , set attainable goals and milestones along the way . Celebrate reaching saving targets as this can motivate you to continue to pursue your investment goals . Do not be tempted to dip into your savings once you have started . Rather spoil yourself when you have a little extra .
The earlier you start saving , the better . As the African proverb goes : A patient man will eat ripe fruit . The illustration below shows how the person who started saving early and continuously ( even with small amounts ) could generate greater earnings compared to someone who starts later and saves larger amounts . The early saver gets a head-start to take advantage of the eighth wonder of the world - compound interest .
Rate of return |
12 %
8 %
4 %
|
R79 082
R74 967
R74 370 R67 520
|
R92 582 |
R116 670 |
R0
R25 000 R50 000 R75 000 R100 000 R125 000
Value after 10 years of saving
Person A saving R500 per month for 10 years .
Person B saving R1 000 per month but only starts after five years
Source : PPS Investments
In practical terms , a 25-year-old investing R500 per month accumulates more assets within 10 years than a 30-year-old investing R1 000 per month . Illustrating the benefit of compounding , investing a smaller amount over a longer time horizon can have a greater impact on investment results than investing a larger amount for a shorter period .
3 Save more
Figuring out where you are spending your money is the first step in identifying which expenses make the most significant impact . Examining and creating a budget is a simple way to see where you could cut back on a few unnecessary expenses to free up some cash to boost your investment contribution . A practical application is the savings you can make on , for example , a takeaway morning cup of coffee . With prices ranging from R20 to R30 for a cup ( thanks Starbucks !), investing an additional R500 is the equivalent of around 20 standard takeaway cups of coffee in a month .
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