JOHANNESBURG - While it’s becoming increasingly difficult to find the extra money each month, the concept of saving seems fairly straight forward. But investing often comes across as more of a complicated exercise.

Both involve keeping a portion of your income aside for future use, but investing targets growth so your money actually makes more money - and it’s easier than you think.

Prudence Thipe, the general manager at Old Mutual, says understanding the difference between the two is the first step toward realising your financial goals. “Saving simply means not spending. So, if you put money away each month in a jar or under a mattress you are saving but it won’t grow. Investing is the next step - it’s what you do with that saved money, and how you grow it.”

This is where many of us fall short, she said. “The latest Old Mutual Savings and Investment Monitor, revealed that 76 percent of black households used informal savings vehicles like stokvels, unbanked cash savings, grocery schemes and burial societies with 34 percent of stokvel assets unbanked or held in cash. But choosing inappropriate investment vehicles for savings means you won't generate returns that will grow your savings.

“For example, if you need quick access to your savings - or liquidity - you need a savings product that allows this. Think of a money-market bank account or fixed income unit trust.

"The returns may not shoot the lights out, but your money is stable and you can access it at any time with little to no disinvestment costs. Drawing cash from a long-term savings product like a retirement annuity (RA), pension or provident fund is either impossible or it comes with tax implications or disinvestment charges."

And saving for your future? When your money goals are longer term - like saving for your child’s education or for your retirement - you need an investment vehicle that provides growth, or has a tax benefit, or one where you cannot access your cash easily in the short term. “Tax free savings accounts, RAs and occupational pension or provident funds are great options, each with different benefits.

The next step is to make sure you stay on track. Thipe suggested two ways. First, motivate yourself: “As human beings, we need to be encouraged to grow our financial know-how about investing wisely. This is especially true for South Africans where making ends meet is a daily challenge.

“The recently introduced Old Mutual Rewards - a rewards programme free and open to all South Africans - is designed to encourage and reward responsible money decisions. By rewarding you for taking the right financial steps, you’re motivated to stay on track and reach your goals."

Last, Thipe stressed the importance of partnering with a financial adviser to help you build a plan that fits your needs. “An adviser will work with you to translate your goals into a financial plan. Plus, they will constantly revisit the plan with you to update it as your circumstances and needs change.”