Beat inflation and financial stress by investing wisely

Financial wellness is not just about having a huge bank balance. It’s about learning new things as financial literacy evolves, having a healthy relationship with money and being in control of your finances.

It involves unlearning old habits and adapting to new ones.

“[Learn] some dance steps against a lack of knowledge in the boxing ring of finances,” says Momentum Savings head of marketing Andile Jonas.

April is Financial Literacy Month, and Jonas says while “our South African wallets are a beleaguered lot” with electricity having gone up, and inflation soaring.

“Between the rising cost of living, getting taxed and interest rates that are so reluctant to go down, it’s easy to feel like the financial forces are out to get you. What we can control is how we manage our money,” says Jonas.

“So, in the ultimate showdown – between feeling overwhelmed about what we don’t understand about money, and empowering ourselves, how do you win? Let’s talk strategy.

“Without grabbing a textbook, inflation means that over time, we can buy less and less with our money because prices keep increasing. Governments calculate inflation by looking at a broad rise in the price of a basket of goods and services over time.

“So, what must you do? Quickly stock up and buy whatever you can? No, there is only one way to tackle Mr Inflation. Put on your shiny pants and boxing gloves and start ... investing.”

Jonas says when people use the phrase “cash is king”, they forget that growth is better. 

“Only through exposure to assets that will help your money grow faster than inflation can you hope to beat it. That’s why your long-term money can’t hibernate in a bank or money market account.

Compounding is your BFF. Compounding sounds like a big word, but it means you earn interest on your money, and then you start earning interest on the interest. Unbelievable, but that’s when your money gets wings. And the earlier you start, the more your money can work for you.

“Consider making the most of tax benefits is a great way of catching inflation unaware. If your growth is 12% and inflation is 5%, you score 7%, and you don’t want tax to eat into that. That’s why it’s better to invest in a retirement annuity (RA) or a tax-free savings account. That is why many financial advisers will suggest these savings vehicles that offer tax-free growth first.”

PayJustNow head of marketing Daniel Hawkins says millennials (age 29-44) and Gen Zs (age 13-28) are the driving force behind the radical transformation of financial literacy.

“[They] are rewriting the norms of money management. Unlike previous generations, which relied on financial advisers, banks and formal education, younger consumers’ financial classrooms encompass the likes of TikTok, YouTube and fintech apps,” says Hawkins.

“Bite-sized videos explaining credit scores, investment strategies and budgeting techniques are reaching millions and these younger consumers are empowered with immediate, accessible and relatable financial advice – often delivered by peers who share their economic realities.

“The rise of digital financial literacy marks a clear departure from traditional models. Today, influencers can explain the nuances of credit scores in 60 seconds and fintech apps can approve credit in minutes. Younger generations are leveraging this technology to make informed decisions and take control of their finances.”   

Jonas advises that one should defend oneself against interest rate hikes.

“Rising interest rates are a nasty fist to deal with if you have debt ... Tackle expensive debt first. Credit cards and personal loans charge high interest rates. It’s best to clear them as fast as possible.

“Pay more than the minimum. A little extra on your bond or car repayment can save you thousands in interest over time. If rates drop, try to keep paying the higher amount. When interest rates decrease, keep paying the same and you’ll pay off your debt sooner.”

Jonas says once you have equipped yourself with these, you will go a long way.

“In the end, financial success isn’t about luck, it’s about strategy and making the right moves. You have boxing gloves for the attack, too. Start small but start now. Even if it’s just R500 a month in an investment, consistency wins,” he says.

“Diversify your money moves. You’ve heard that we shouldn’t have all our eggs in one basket. Have an emergency fund and savings for your short-term needs. Regarding your long-term savings, speak to a financial adviser to make sure your investment is spread over various assets. The secret is that one asset can make up for another that is going through a dodgy patch – and in the long run, all will even out.

“Think like your future self. It’s within your control to be the cool boxer who can retire without stress, afford nice holidays, and not panic when you face financial punches. You can beat enemies like inflation, taxes and rising interest rates with the above uppercuts. Wipe your brow, put in your mouth guard and get ready to float like a butterfly and sting like a bee.”