Share these 5 money tips with young adults and teens to show them how to start saving from a young age.
There’s so much info out there telling people what to do with their money, but if they don’t have a fat bank account when they’re fresh out of school, your kids might think they’re too young to be concerned about things like saving, investing, long-term insurance and planning for retirement.
Idris Seedat, Manager of Corporate Social Investment at the JSE’s Education Division, says now is as good a time as any to get money savvy. ‘A young person’s biggest financial asset is time. Any investment will benefit from compound interest, this means that money earns interest on interest, and even a small amount can, over time, become a sizable nest-egg,’ says Seedat.
So what should your kids be doing with their money? Give them these tips to help them plan for their futures:
1. Start saving
Saving is the foundation of managing finances, so start early and get into the habit of saving regularly. Cutting back on spending is a good way to free up more money to save. Decide how much money you’d like to put away and set up a monthly debit order to make the payment. If you earn pocket money, you can even save a portion of that money instead of spending it on the latest gadget or phone.
2. Invest on the stock exchange
Some people think that investing is only for an elite group of people, or that you need lots of money to start investing. But anyone can do it — just investing from as little as R300 a month in stocks, or exchange traded funds can add up to a significant lump sum. Owning stocks is considered to be one of the easiest and most profitable ways to grow your wealth over the long term.
One of the best ways to learn the in-and-outs of trading and investing is to participate in the JSE Investment Challenge. Novice traders get an imaginary sum of one million rand to invest in JSE-listed shares in a virtual portfolio. The team’s performance is tracked and measured in a competition against other teams taking part in the challenge. To find out more about the challenge, go to schools.jse.co.za/ or university.jse.co.za.
3. Don’t get into debt
Only spend money that you have — avoid the temptation to sign up for store cards, and don’t charge unnecessary purchases to your credit card. Before you buy something, ask yourself if you really need the item, and if the answer is no — don’t buy it! A good way to avoid debt is to create a savings goal. Save towards something you really want, like a fab overseas holiday. That way you won’t feel tempted to spend money you don’t have on things you don’t need.
4. Plan for retirement
Retirement might seem far off, but starting sooner means that your money has time to grow. Start a retirement annuity as soon as you start earning a salary. Even if it is just a few hundred rand, over time the interest earned on that will be substantial.
5. Long-term risk cover
Set aside a portion of your income for long-term insurance like life cover, critical illness, disability cover and income protection — you and your family need financial protection if you get sick, are injured, become disabled or die. Talk to a financial advisor about what kind of cover you need at this stage in your life.