There just never seems to be enough money to go around. You know you should be saving something every month, but it just seems like an impossible goal. There’s no fat in your budget, so how do you find extra money to put away for a rainy day?
Start saving small
The trick to saving when you don’t earn that much to begin with is to start small. If you think in terms of putting away R1 000 per month, you’re probably never going to find the extra cash. But if you think in even smaller amounts – R10 a day for instance – you might find that it becomes manageable.
But where would you find that R10 per day?
Perhaps these suggestions will spark some inspiration:
- A daily 300ml soft drink costs R10.49. You don’t need to replace it with anything. Just drink tap water – it’s far healthier for you.
- Canteen or take-away food could cost you around R50, whereas if you brought a packed lunch or leftovers from home, you’d probably be feeding yourself for closer to R20 a day.
- If you smoke ten cigarettes a day, and a pack costs you R40, you’d save yourself R20 a day by quitting. Again, this money-saving choice is also hugely beneficial for your health.
- At around R100 a GB, data is expensive. If you get more disciplined about only watching videos, catching up on social media or browsing the internet when you’re in a wifi zone, you could save yourself a couple of hundred rand a month.
- If you don’t buy a lottery ticket, you can’t win the jackpot, right? But forgoing two R5 tickets a week could contribute to an achievable personal jackpot in the form of savings.
- Make more meat-free choices. Meat is probably the most expensive item on your plate. For every meat meal you substitute with vegetable protein like beans or lentils, you probably save R20.
A combination of these kinds of choices should get you to R10 a day, which would amount to R300 a month in total savings. But it’s not a real saving unless you save it! Of course, you have to make a point of putting the money you’ve saved aside – into a jar or special section of your wallet – so that you don’t just spend it on something else.
The magic of interest
That’s only the beginning of the magic of saving. If you deposit your R300 into a savings account each month, you will earn interest, which means that your money will grow every month. Take a look:
|4||R1 200||R5.13||R12.80||R1 212.80|
|5||R1 500||R6.43||R19.23||R1 519.23|
|6||R1 800||R7.73||R26.97||R1 826.97|
|7||R2 100||R9.04||R36.01||R2 136.01|
|8||R2 400||R10.35||R46.36||R2 446.36|
|9||R2 700||R11.67||R58.03||R2 758.03|
|10||R3 000||R13||R71.03||R3 071.03|
|11||R3 300||R14.33||R85.35||R3 385.36|
|12||R3 600||R15.66||R101.02||R3 701.02|
*For this calculation, we used the interest rate of a Capitec savings account, which is 5.1% per year.
As you can see, in addition to the lovely sum of R3 600 you will have saved over a year, you would have earned just over R100 in interest. The interest you earn grows each month because you earn interest on your interest. Although you are starting small with R300 a month, these principles of saving will serve you well as you continue on your journey to financial freedom.
The bottom line
You’ve made a great start, just by saving in small ways. The more you manage to save each month, the more it adds up and the more interest you earn. And then, you earn interest on the interest. When you have a bit of a bigger sum to invest, you can start investing in other things like unit trusts, which earns you even more.
Saving is good, earning interest is better, and investing is simply the best thing you can do with your money. Start small today, and your savings balance could be looking impressive, with the added bonus of interest, by the end of the year.