South Africans seem to be waking up to the fact that debt should be avoided, but we are still not saving enough, according to the latest Old Mutual Savings and Investment Monitor. Most people are not saving for their children’s education, and 40% of respondents said they have no formal retirement-savings vehicle.
Many factors drive poor savings habits. I believe the underlying reason is that many people see saving as something negative, something that reduces the amount of money they have to spend on fun things now, and thus something to put off. However, if saving is approached in the right spirit, experience proves that saving can be rewarding in the short and the long term.
It’s easy to understand the long-term aspect. If you have provided adequately for your retirement, you will have a much happier time when you are old – you may even find that the term “golden years” is a reality, not an empty cliché.
But most people struggle with the short-term aspect. Doesn’t putting money aside mean that less is available now?
This is true, but it is also true that much of our unplanned spending is often accompanied by feelings of guilt and the need for self-justification. In practice, it’s far more pleasurable to be able to spend without a care in the world – and that’s the reward of knowing that spending now is not going to affect you adversely in the future.
I always advise my clients to make themselves the first line item in their budget. Here they should list the money they intend to spend, but also the money they will put aside for the future. This helps to put saving in the right perspective: saving is spending on you – in the future, to be sure – but it is for your benefit, not someone else’s.
This attitude is contrary to the prevailing emphasis on instant gratification, but the truth is that if we cannot learn to delay gratification, our happiness will be short-lived.
You can also use saving to help your children develop a sane and sustainable attitude towards money. Say, for example, your family decides to spend two weeks touring Europe. The usual approach would be to finance the trip using credit, which means that spending all those euros will hardly be carefree; each time you pay R70 for a cup of coffee, you will be unable to avoid thinking that you still have to pay for it, plus interest.
Instead, if you made it a family project to save for the trip over three years, your children would learn a great lesson about saving and it would mean that, when you did take the holiday, you would be in a position to spend with a light heart.
The same thing applies to all spending: it is more pleasurable if you know it is not compromising your future.
In short, we need to learn to see saving as something we are doing for ourselves, not some sort of “grudge purchase”. At the same time, having a solid savings plan changes the dynamic of enjoyment in the present, because your spending now will be purely pleasurable, with nothing to pay in the future.
Natasja Hart is a wealth manager at GCI Wealth, a boutique financial planning and investment group with offices in Gauteng, KwaZulu-Natal, and the Eastern and Western Cape. She has the Certified Financial Planner accreditation and is a past winner of the Financial Planner of the Year award.