A big part of growing up and learning to adult involves making responsible financial decisions. You don’t have to be a financial planner to know that financial security won’t just benefit you; it can also translate into having the means to look after your family.  

To make things easier, we spoke to a few financial planners to seek advice about when and where to start saving and investing and what to be careful of.

The difference between savings and investments

“With so many options out there, beginning your investment or savings journey can be incredibly overwhelming,” says Megan Crafford, a certified financial planner at Southwood Financial Planning. Before getting started, it helps to learn the difference between savings and investments.

Samke Mhlongo, CEO of wealth-coaching consultancy TNC Wealth Partners, says savings is a short-term endeavour intended for a particular use or for emergencies, whereas investing is more long-term, either for retirement or wealth creation to pass on to the next generation.

“Savings tend to be fluid and easily accessible without penalties,” says Mhlongo. “Investing, however, is when you start taking risks because you want to grow higher than inflation.”

Didintle Mokonoto, marketing manager for Astute, adds that savings accounts are easily accessible with a short or no notice period, with little or no risk, and are usually undertaken for one to three years.

“Investments are usually selected to achieve mid- to long term goals,” Mokonoto says. “The longer investment time horizon affords the investors an opportunity to invest their money into higher-risk assets such as stocks, bonds, and property with the expectation of making money for them.”

When is the best time to start saving and/or investing?

“Have you ever heard the Chinese proverb saying about planting a tree? ‘The best time to plant a tree was 20 years ago. The second best time is now’. The same goes for investing,” says Gugu Sidaki, director of Wealth Creed. “If you have not started your investment journey, consider getting started as soon as possible as you reap the full reward of a good investment through time.”

Keegan Pickard, a financial planner at SA Financial Planners, says you don’t have to start saving thousands and thousands of rands from the start — as long as you start somewhere.

“There is no perfect, scientifically calculated age to start. The biggest step is just to start,” Pickard says. “We all live within our own means. I always encourage my clients to save whatever they can no matter how small it might seem. You can always adjust the amount that you are saving at any time in the future.”

Where is a good place to start?

Sidaki says not all investments are suitable for everyone. Before you get started, consider your goal (what you are trying to achieve with your money), your investment horizon (the time you have to be invested), your risk appetite (how much uncertainty and fluctuations you’re able to take regarding your investment) and your budget (how much can you afford to invest).

Start investing small amounts

Sidaki suggest starting with small amounts of money on platforms where you are able to self-navigate with relative ease. She says there are many reputable platforms where the minimum investment amounts are affordable, including OutVest, Allan Gray, 10X Investments, and Coronation. “They also have very capable call-centre agents available to answer any of your questions, without providing advice,” she adds.

Traditional banking products

For saving, Mhlongo suggests trying normal banking products which don’t really give too great a return but are safe if you can’t afford to take too much risk.

“A tax-free savings account allows you greater flexibility in terms of accessing the money,” says Pickard. You can withdraw from your tax-free savings account at any time in case of a rainy day or any unforeseen financial emergency.”

A retirement plan

Pickard suggest starting with a retirement plan. “I have had many examples in the past of clients reaching retirement age and I have to give them the bad news that there is not enough capital saved up to support their income that they need in retirement.”

A retirement annuity is also a great tax-efficient savings vehicle, Pickard says, as there are no tax implications on dividends and interest earned within your investment, and no capital-gains tax on investment growth. “Also, you can claim your contributions from Sars each year when you file,” he says.

Tracker or index funds

If you’re looking to get into the stock market, Mhlongo says you can try Satrix, which will track an index, or an average of distinct shares as defined by that index. “So if it’s the top 40, it will give you the average of the top 40. If it’s a property index, it will give you the average of the top-performing property stocks, and so forth.”

Crafford adds that companies such as Sygnia and Easy Equities provide investors with cost-effective platforms from which to access the stock market by investing in tracker/index funds.

What about cryptocurrencies?

Investing in cryptocurrencies such as Bitcoin has been a hot topic for some time now. “For as many arguments against Bitcoin, you will find arguments in favour,” says Crafford  “Overall, we do feel that there are enough arguments against bitcoin that we would be hesitant to recommend that our clients contribute more than a small percentage of their savings to a Bitcoin portfolio. 

“We would also not recommend this for first-time investors who have yet to set up their foundation of savings.”

Mhlongo says cryptocurrencies have given higher returns than any stock market and any commodity in the world for 2021. However, she adds, “You should only go into crypto with money you’re willing to lose.”

This does not constitute financial advice. Please speak to a registered financial-services provider before making a decision about saving or investing.

This article first appeared in the May/June 2021 print edition of S Mag.