How to save towards investing
Investing is an essential way to build wealth, but you’ve got to have some money to start with, so how do you make the crucial leap from saving to investing?
You can invest even on a small budget, but you need a solid financial base, a goal and a plan for your money.
Here’s a roadmap to navigate the essential steps to save effectively and prepare for adding investments to your financial journey.
Figure out your financial goals
Before you start stashing away your cash or dreaming of how you’re going to grow it, first ask yourself, “What am I saving for?”.
This is an important question as it will help you determine how much you need, by when you need it, and which investment solution will ultimately be the right option for your goal. Also, remember that you need different kinds of savings, so not all your money is going into one basket.
Are you saving with short-term goals in mind, such as building an emergency fund or a downpayment, or aiming for longer-term goals, such as retirement or financial independence?
Start small, stay consistent
You don’t need to have a large sum of money as a base amount, but you need to start somewhere and contribute consistently so that your money can start building your reserve and earning interest, and interest upon that interest. This is called compound interest.
For you to be able to consistently contribute to your savings, you need to make it a priority and have it occupy a specific space in your budget. You want to ensure that your savings and cash flow and ability to pay your bills aren’t in competition.
Top tips for making space for savings in your budget
Track your income and expenses
Use the Budget Manager add-on on our Banking App to help you monitor your income, spending and how much you have left.
Unlock more money to put away
Once you’ve got a handle on what your money is doing, identify areas where you can reduce spending and rather use that money for saving.
Automate your savings
Set up automatic transfers into your savings account on our Banking App so you don’t have to think about saving every month; it just happens and will become a habit.
Explore savings options
Whatever your financial goal, you want to maximise your savings potential so that you have a solid foundation to be able to confidently transition from saving to investing and build your wealth.
Why you need your money will help determine how you can grow your money. Having the right solution for the right purpose is important to set you up to start your investment journey.
Consider these options to kickstart your journey:
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High-yield savings accounts |
Money market accounts |
Tax-free savings accounts |
Retirement annuities |
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Help you grow your money faster with higher interest and access to your funds. |
Grow your capital at competitive interest rates. |
Grow your money without the burden of tax on your earnings*. |
You can start saving for your retirement investment without having a set amount to start with; simply contribute every month. |
How much do I need to start investing?
Deciding how much savings you need to start investing depends on your financial situation, your investment goal and when you want to reach it.
For a retirement goal, you want to aim to invest a certain percentage of your yearly income and then increase it incrementally every year so that you keep up with inflation. It’s best to speak to a professional to ensure you are saving enough.
For other investing goals, such as purchasing a home, travelling or an education, look at how much it will take to achieve it and your time horizon and then work backwards to break down how much savings you need, and which option will grow your money the fastest.
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Top tip Get professional and reliable advice. Work with an advisor to help set you on the right path and select the right investment strategy for your needs. |
*Terms and conditions apply
Disclaimer: This article is solely intended for information. It does not constitute financial, tax or investment advice or recommendation. Please speak to a financial advisor or registered financial professional before making any financial decision(s).
Standard Bank, its subsidiaries or holding company, or any subsidiary of the holding company and all of its subsidiaries make no warranties or representations (implied or otherwise) as to the accuracy, completeness or fitness for purpose of the information provided in this article or that it is free from errors or omissions.
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