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How to start saving from your first pay cheque

Mar 16 2018 15:04

Cape Town - Investing when you are young sounds like an expensive and daunting task, especially when you have just started your first job, says Lance Solms, managing director at Itransact.

He says the best time to start is with your first pay cheque.

"There are plenty of investment options available that don’t require you to have millions. How much you save depends on what you want and what your goals look like, there are investment and savings options that require even as little as R300 per month," said Solms.

He shares some tips on how to get started:

Start early

Keep in mind, savings accumulate and the interest compounds without taxes, as long as the money is not withdrawn. So, it's wise to establish an investment vehicle early in your working life.

“Another reason to start saving early is that, usually the younger you are, the less likely you are to have burdensome financial obligations, for example a spouse, children and mortgage. That means you can allocate a small portion of your investment portfolio to higher risk investments, which may return higher yields.” says Solms.

“When you start investing while young, before your financial commitments start piling up, you'll probably also have more cash available for investing and a longer time horizon before retirement. With more money to invest for many years to come, you'll have a bigger nest egg.”

Know your goals

Knowing why you’d like to invest your money and how you’d like to see it grow over time are both key to making sure you stay on the right track.
List your goals so you can figure out how much they’ll cost and how you can use investing to achieve them. Once you know what you want, you can start planning and saving accordingly.

Research
 
The best way to learn about investing is to develop your skills through research and the use of virtual portfolios. There are plenty of platforms on the internet that enable you to develop your skills and make mistakes.

Researching enables you to understand the complex financial terms and different investment options available to you before you seek advice from an expert.

Get help from an expert
 
As much as it’s important to get acquainted with the market, there are so many different investment vehicles to choose from like bonds, mutual funds, exchange traded funds, property, stocks and more.

Getting an expert such as a financial adviser to help you make the right decision is important, in his view.

"A financial adviser will provide you with expertise and knowledge you may not have. A good financial adviser takes the role of helping you reduce your financial stress," he said.

Cut down on your expenses
 
"Saving and investing requires a lot of discipline. You probably aren’t saving because you think you can’t afford to," said Solms.

It’s as simple as changing a daily habit. Maybe you buy a R50-lunch at work every day. If you took a packed lunch, you could save R1 000 a month.
There are little things you can cut back on that will enable you to save up more money to invest. A little goes a long way.

“One of the problems that come with a lack of investing for most young people is the complexity of most products that would leave one confused and not knowing where to start," said Solms.

Smart, disciplined, regular investment in a diverse portfolio, can produce good long-term returns for retirement and provide additional income throughout an investor's working life.”

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investment  |  retirement  |  savings  |  youth  |  money
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