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Sensible saving
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South Africa has a culture of spending rather than saving. Here are some tips on how to start making provision for your retirement.
Article: Corlia Erwee from Ideas
"South Africa has a culture of spending," says René Roux, an Old Mutual marketing manager. "That's why up to 94% of us become dependent on children and other family members when we retire. Many of us then have to lower our standard of living dramatically."

How can I save?

  • Debt
    The best way to save is to payoff debt. Work out a debt-repayment plan and stick to it. You should at least aim to pay off your house and car before reaching retirement age.

  • Property
    Invest in property, especially in places such as the Western Cape, where this is a safe option. A second property, which can bring in some rental income, is also a very valuable asset, provided it's paid off or you can easily afford the repayments when you reach retirement age.

  • Fixed monthly deductions
    Pay money into an investment or savings account every month. Deduct the amount from your spending money before doing your budget. Consider having it deducted automatically from the account into which your salary is paid.

    Remember: Your choice of saving method should suit your age. If you're still young, you can afford to take financial risks, but as you get older, your investment strategy should become more conservative.

    Which banks or products?
    There is no one right answer to this question because there are scores of options, each with its own pros and cons. These are some of the guidelines you need to bear in mind:

  • You should always have access to your money. For instance, it shouldn't be so tied up that you can't use it to pay off your house when you retire.
  • You should be able to deposit money into the account or withdraw some funds when it suits you, and you should be able to choose for how long you'd like to invest.
  • Ensure that the bank or firm handling your money is trustworthy, that you can easily afford the regular deductions and that your broker, if you are using one, is registered with the Financial Services Board.
  • The longer you invest your money, the more interest you will earn. Ask yourself what you want to do with the money and when you will need it.

    How much should I save?
    Experts say we should be saving at least 10% of our gross annual income. If you're over 50 and you don't have much of a nest egg, you should be saving 20% of your gross annual income. If you can't afford this much, you should still bear in mind that every bit helps.


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