We all know that saving is important for the future, but developing a habit of saving can be difficult! Here are some common money mistakes that could be negatively affecting your ability to save…
‘There’s a big difference between being financially prudent and trying to save money by taking shortcuts and picking the cheapest product or service,’ says Eunice Sibiya, Head of Consumer Education at FNB.
Money mistakes you could be making:
1. Buying in bulk
- Buying in bulk may seem like a great idea, goods are usually cheaper in bulk, but it doesn’t necessarily mean that it will save you money in the long term. ‘It’s easy to get swept away when you see the lower prices of bulk products, but go through a few checklists in your head, like do you have storage space for it, what is the expiry date and will you end up consuming more just because you now have a product that’s easy to access?’ Says Eunice.
- Don’t be tempted to buy luxury consumables in bulk such as chocolates, biscuits or soft drinks. ‘This will lead to consuming more of these products than you would usually,’ warns Eunice.
- Check the expiry date of bulk items. ‘A low discount on tinned chickpeas may seem great at the time, but unless you know your family eats chickpeas on a regular basis you’ll soon be stuck with tins of produce that have expired, take up space and ultimately need to be thrown or given away.’
- Stick to items that you use regularly, such as household cleaning products, that you know you won’t end up using more of, just because they’re in easy reach.
2. Cutting insurance
- Take a hard look at your circumstances. If you’re young and single without a car or home, you may be able to get away with no insurance. However, if you have responsibilities like a family, car and home or household goods, it’s never worth the risk to skip or skimp on insurance.
- ‘Insurance is financial protection against the possibility that an event or situation will leave you or your family financially worse off. You’re insuring against something that may never happen, but if it does, you could stand to lose something you have worked towards for a long time. Imagine if you lost your home, car or even a holiday that you’ve spent months saving for if you haven’t taken out travel insurance.’ If you aren’t insured in any way, you need to take a look at your circumstances and remedy this as soon as possible.
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- It might be a shock to many but you could be insuring household or personal items that are costing you more than they’re worth. Rather take stock of things to insure that will either bankrupt you if something dire had to happen to them or seriously set you back in Rands. Insure smartly to save wisely.
4. Linking your bank accounts
- Linking your savings with your cheque account might give you the false idea that you have more money than you actually have to spend. Keep a certain percentage of money in a separate savings account for rainy days but put the rest in a fixed account that is not easily accessible when you want to swipe for something not emergency related.
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5. Using cheap services
- Going with the cheapest option for any services, from redoing your bathroom to servicing your car, is not always a good idea. Some services are investments. ‘If you want your geyser to still be running smoothly in a few years’ time or your car to get you safely from work to home, it’s better to use a reputable service provider that may be a bit more pricey, but can guarantee their work, rather than a fly by night that won’t take responsibility for their work,’ advises Eunice.
- Trying to take cheaper shortcuts isn’t always in your best financial interest. ‘Take stock of your spending habits and understand whether you’re actually saving money when you settle for the cheaper option, or if you’re costing yourself more in the future,’ concludes Eunice.
6. Not having a goal
- It’s easy to give up on something if you don’t have an end-goal in mind. Start by putting short, medium and long-term plans in place and work your way through the list but make sure that neither of the three plans ‘eat’ into each plan’s savings. Also, keep this separate from your emergency saving stash.
7. Choosing the wrong account
- What good is your savings if it is not yielding any interest? It’s as good as sitting in your cupboard or under your mattress. Do a little digging around and find the bank that will give you the best interest rate. This way, you’ll know that the money that you are saving is growing at a rate that is aligned with your short, medium and long-term saving plans.