A savings and investment guide for millennials

Lameez Omarjee
2018-07-31 12:49
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Millennials in South Africa. (Photo: iStock) iStock

South African millennials have a different outlook on savings and investment to that of older generations and US millennials - and this is down to a number of factors, according to research by Alexander Forbes.

Barrie van Zyl, senior manager at Alexander Forbes, says only 38% of South African millennials contribute to a formal retirement vehicle, and youths are saving at a lower rate than their US counterparts.

But this is mainly because of the high unemployment rate, family commitments, credit cards and student loans. "The future of this generation is therefore looking quite uncertain on the basis of current saving trends and debt commitments," says Van Zyl.

Individuals who do save and invest do not necessarily opt for traditional investment vehicles like retirement annuities and endowments, he explains.

Investing habits

"Millennials are looking for a faster and easier way to grow their wealth, which is why cryptocurrencies saw a massive influx of investors who were attracted by the huge, yet volatile gains.

"Millennials are also more entrepreneurial, preferring to start a business, or invest in one or multiple start-up firms through friends and family," he says. 

Van Zyl says millennials don’t necessarily acquire assets, but rather try and secure accessibility of those assets.

"This, however, does not mean that millennials do not invest. Unit trusts are quite popular with millennials, as they can open an investment account online, invest cost effectively, make their own changes, and they can track their performance through a mobile app," he notes.

"They also favour tangible assets such as gold and Kruger rands, and many millennials are looking at alternate investment options such as unique collectables and art."

Here and now

Millennials are also trying to find the right balance between "here and now" experiences with their long-term needs, says van Zyl.

"Many young individuals are starting to understand the importance of making certain sacrifices now in order to accumulate wealth over time."

Some millennials Fin24 reached out to shared their savings tips, for the short term and long term.

Savings hacks

Priya Gopal (26) prefers to pack lunch instead of buying to save money.

"Students should use their status to get discounts for activities and travelling. Students can also share dorms and flats to save on rent," says Gopal.

"Working people should monitor credit card spend to avoid high interest charges," she adds. Unsubscribing from sites which send marketing emails to rack up spending online also helps.

It’s also good to start with the basics, like having a budget and monitoring it, says Gopal.

Another savings hack from Gopal is to ask for generic medication at pharmacies instead of opting for more expensive, branded medication.

When it comes to saving for the long-term, Ildiko Gyarmati (26) says you should "pay yourself first" by transferring a portion of your salary to an investment account. This account should remain untouched while it grows interest until its maturity date.

Thobi Shange (28) similarly has an account she does not touch. "I have an account that will not let me touch my money for over three years. It’s the only way I can keep my fingers out of it.” Shange advises others to have a debit order for automatic transfers to your savings account.

"Just as one needs to plan for an overseas trip, a new car and even dinner with friends, so too must the youth of today plan for a better tomorrow, brighter future and a self-supporting retirement," Van Zyl says.

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