Effective saving strategies for a secure financial future

Saving money might seem like a daunting task, especially if you're aiming to achieve long-term goals such as buying a home, funding your children’s education, or retiring comfortably. However, much like building a house, financial success isn’t built overnight; similar to the discipline you apply in your everyday life, it’s a steady process of laying down one brick at a time.

Each contribution you make towards your retirement annuity, tax-free savings account, or voluntary investment, to name a few, becomes a foundational brick, helping you build a secure and resilient financial future. 

 Start with a solid plan 

Just as you wouldn’t build a house without a detailed plan, you shouldn’t begin saving without clear goals. Start by defining what you’re saving for, such as retirement, education, a home, or a holiday, to name a few. This clarity gives your savings purpose, making it easier to stay motivated and disciplined. Set short, medium, and long-term goals, each with realistic timelines and targeted amounts that you can track over time. 

Lay the foundation: pay yourself first 

The most effective strategy to begin saving is to pay yourself first. Before you spend on anything else, allocate a portion of your income directly toward your savings plan. This strategy prioritises your future financial well-being and turns saving into a habit that compounds over time. To successfully lay the foundation, automating your monthly contributions through debit orders ensures you pay yourself first, much like laying bricks one after another. As you build on your contributions, you lay the foundation for your financial freedom. 

Build with the right materials: available investment products 

Below are a few of the investment products available to investors in the market: 

• Retirement annuity: Contributions are tax-deductible up to 27.5% of the highest of taxable income or remuneration, limited to R350,000 per tax year. A member can retire from the fund after reaching the age of 55 (or due to ill health if approved by the Trustees). Funds are also accessible if the individual emigrates. 

• Tax-free savings account: You can make flexible contributions (lump sum, debit order, or ad-hoc contributions) up to a maximum of R36,000 per year and R500,000 over your entire lifetime, and all growth, dividends, and interest earned is tax-free. Contributions in excess of the limits will be taxed at 40%.  

• Voluntary investment: This is a flexible, personal investment portfolio where you can access your investment at any time. Tax may be payable on income and dividend distributions, however, and tax on capital gains may be payable when you sell or switch units within the investment. Note that tax reporting is done yearly, and you will receive tax certificates to assist you in completing your tax return.                      

Although not limited to these options, the above investment products are some of the building blocks you can use as part of a well-constructed financial plan. Much like choosing the right materials when building a house, selecting the appropriate investment vehicles is key to ensuring financial success. 

Use the right tools: selecting the right portfolio 

When building a house, you would not try to make your bricks, pour your concrete, or handle the electrical and plumbing unless you are an experienced and professional builder. In a similar vein, there are experienced portfolio managers and investment teams who manage what are known as collective investment schemes. These are investment instruments that give investors access to professionally managed and diversified portfolios of assets, including equities, bonds, property, and cash.

Given their years of experience, the managers of these portfolios or collective investment schemes provide you with access to investment opportunities and expertise that might be difficult to access on your own. Just as you trust engineers and builders to get the structure of your house right, collective investment schemes let you rely on expert fund managers to navigate the markets effectively on your behalf. 

As with building a house, the design, materials, and construction of your investments will depend on your budget, plans, and appetite for risk. Portfolios will vary based on your investment goals, time horizon, and risk tolerance. Working with a financial adviser helps you ensure that you are using the right tools to build a portfolio that reflects your unique plan. 

Stay consistent: brick by brick 

The key to successful saving is consistency. Even when progress feels slow, every lump sum and debit order counts. The concept of compound growth in investments is a powerful force that allows investments to grow exponentially over time. 

 Ultimately, saving is not about one grand gesture but rather a series of small, intentional actions. With planning, discipline, and the right strategies, you can construct a solid financial foundation that supports your goals and financial freedom to withstand the test of time. 

* Berry is the head of Sales at PSG Wealth.

PERSONAL FINANCE