According to Old Mutual’s 2019 Saving and Investment Monitor, South Africans are feeling the economic pinch more than ever. The 2019 statistics saw a decrease in savings for emergencies, with 38% of urban, working households only having enough money to last them a month or less should their primary source of income disappear.
Gontse Tsatsi, Head of Retail distribution at Old Mutual Investment Group, says that the statistics highlight that South Africans are struggling to put money away on a regular basis. This is against the backdrop of a country with a historically poor savings culture, but given the current economic environment, need to save now more than ever.
With this context in mind, he points out that people who set clear goals and have a plan to achieve them are more likely to succeed. “Generally in life, if you want something you have to work for it, and the same applies to your finances. The clearer you are on what you want, the more likely you are to work for it. You need to have discipline to make your money work for you. After all, your goals should be compelling enough to spur you on when you have to balance short-term sacrifice for long-term investment”
Tsatsi believes that the action of saving is behaviour based. Once a person gets into the swing of it and repeats the behaviour continuously, it will become a habit. It is similar to committing to do regular exercise. The more you do it, the better you become at it. “Almost everyone knows that you should save money every month, but few people actually do so or are able to do so consistently. This is where most people fall off the savings wagon.”
Tsatsi believes that the first step to regular saving is to identify the goals that drive you. “I write a list of all the things I want and need to do in the future. Most people who do this will end up with quite a long list. This makes it harder to prioritise one goal/need over the other, so why not rather start by establishing savings buckets to categorise your goals into specific areas? This can consist of short-, medium- and long-term goals. Short-term goals allow you to tick goals off as they are achieved, which will give you some hope and motivation to continue being disciplined with your savings to reach your long-term goals. Whether it’s a deposit for a new house, enrolling for a short course to learn new skills or an overseas holiday.”
There’s a saying that goes ‘a goal is a dream with a deadline’. In other words, until you put a timeline to something, your list is nothing more than wishful thinking, says Tsatsi. “Once you have established how much you need for each item on your list, a deadline will help make it attainable, as well as breaking the bigger goal down into smaller milestones. This will allow you to track your progress as you work towards the end goal. Without a clear goal, most people will find themselves spending rather than saving. When you have clear deadlines and milestones, it is also easier to celebrate as you make progress on these.”
He highlights his belief in making an active decision every day in order to save. “For example, the purchase of a daily R25 coffee can end up costing R100 a week, which amounts to over R5 000 in just one year. This money has the potential to work so much harder for you if you put it into a Unit Trust investment. Saving and investing is not a once-off decision, it is a conscious choice you make every single day.”
Tsatsi also notes that saving should be a flexible notion. “When you are struggling to make ends meet, you have the option of reworking your budget to see where you can cut costs. Life happens and sometimes we go through tough financial times. So when you are facing a tough period, you don’t have to stop saving. Rather decrease the amount that you are putting away and during the months when you have extra funds you can increase the amount again.”
Taking the effectiveness of goal-based investing into consideration, Old Mutual Unit Trusts has identified five core investor goals or needs: Home and security; Freedom and adventure; Education and ambition; Retirement independence and A big goal (entirely open to your choice/preference). The team handpicked a core range of investment funds known as the Investment Series, each varying in risk exposure and expected returns, narrowing down the options for investors to select the fund most suited to their personal saving goals, he explains
“A goal-based investment strategy is a great way to lay the foundation for success, but it is just that, a foundation. Building on that foundation takes focus and commitment. By keeping goals top of mind – tracking progress, adjusting lists when circumstances change, and continually setting new and inspiring milestones – SA savers can give their investment goals the best chance at success,” concludes Tsatsi.