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5 ways you can start your financial journey of saving and investing

People should start early when it comes to saving and investing if they want to achieve their financial goals. Picture: Jcomp

People should start early when it comes to saving and investing if they want to achieve their financial goals. Picture: Jcomp

Published Aug 3, 2022

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Most people are encouraged to start early when it comes to saving and investing if they want to achieve their financial goals.

However, saving for the future can be daunting, especially if you haven’t done it before.

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Ester Ochse, product head: FNB Money Management, shares five ways you can start saving and investing for the future.

Budget

Having a budget allows you to have a look at where you can free up cash that can be saved for an emergency or a longer-term investment. Prioritise saving and investing as a part of the needs in your budget. If you are unsure, there are online budge templates that can help you start your own.

Extra cash flow

Direct any extra cash flow that you have towards an account for emergency savings like a cash investment or bank account. For emergency savings, you should look for account that will allow you to access the funds quickly or within seven days. To make the process easier, schedule a transfer from your bank account into the savings account.

Long-term

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You need to match your investment horizon to the type of fund or solution that you are selecting.

The biggest threat to your investment:

– in the long-term is inflation

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– in the short-term is volatility

“You want to ensure that your long-term investments aim to outperform inflation, and exposure to growth assets is the way to do it. With options that start from as little as R300 per month, there is a solution for all goals,” Ochse said.

Create timelines for your investments

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Having time lines for your investments is important:

Investing for 0-2 years, you mainly need to consider cash and money market investments. You should also include your emergency savings here. Goals for these investments can include saving for stationery, school fees for the next year or a holiday.

Investing for 2-7 years, you will have exposure to some growth assets such as shares and property, as well as some defensive assets like cash and bonds. Goals that fit this type of investment include education or saving for a house deposit.

Investing for 7+ years, is true long-term investing and exposure to proper growth assets is important. This type of saving is ideal be for retirement and long-term wealth creation.

Avoid too-good-to-be-true investments

If you are promised returns that are beyond reasonable, and it seems too good to be true, then it is best to stay clear of them. Instead focus on consistent saving and investing to get the pay off in the long run.

According to Ochse, the most important rule for saving is starting early and starting small. Starting earlier allows you to have the benefits of compounding interest as well as returns, and you can slowly increase the amount of money that your saving.

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