Why do you need a Savings Plan?

Save, save, save is something we have heard our entire lives. Then why is it so difficult to do? We live in an age of instant gratification where we want it now. Society teaches us that we need something immediately to be on trend, to fit in, or to be happy. And let’s face it, very few people were taught from a young age to save for something. If they wanted something, it was given. How do we change this mindset? Baby steps.

Why do you Need to Save?

Saving money is fundamental to financial well-being, offering numerous benefits that contribute to both present and future security. Here are key reasons why saving is essential:

Financial security and peace of mind

Establishing a savings cushion allows you to handle unexpected expenses, such as medical emergencies or urgent home repairs, without resorting to debt. This financial buffer reduces stress and provides peace of mind, knowing you’re prepared for unforeseen events.

Achieving life goals

Savings enable you to pursue significant life milestones, such as purchasing a home, funding education, or starting a business. By setting aside money regularly, you can accumulate the necessary funds to achieve these objectives without financial strain.

Retirement planning

Consistent saving is crucial for building a comfortable retirement fund. Starting early allows your investments to grow over time, thanks to the power of compounding interest, ensuring you have sufficient resources to maintain your desired lifestyle in retirement. Correct retirement planning is the key to a successful retirement.

Avoiding debt

Savings reduce the likelihood of incurring debt for unexpected expenses or major purchases. This financial independence helps you avoid high-interest loans and credit card debt, keeping your financial health intact.

Flexibility and freedom

A robust savings account provides the flexibility to make life choices without immediate financial constraints. Whether it’s changing careers, relocating, or taking time off work, savings give you the freedom to make decisions aligned with your personal goals and values.?

Saving Step by Step

To save for something, you need to know what you are saving for and why. Do you need a house deposit, money for your children’s education, or a vacation?

Savings Goals – What do you want?

What do you want that requires money? Do you want to buy that first home, a new car, or a Mediterranean cruise? Do you need to fix a leaky roof or send your children to university? Once you have decided what you need money for and have a savings goal, you can put a plan of action into place. Many apps offer a savings calculator to help determine how long it will take to achieve your savings goals.

Plan of action

How will you go about saving? You need a plan of action and a savings goal to work towards. How much do you need, and how long will it take you to save the required amount? This forms part of the plan. Also, how much can you save monthly? Will you save regularly or perhaps quarterly using your bonus? Knowing where the savings will come from will make the process easier. It could be a combination of monthly savings supplemented by bonuses, increases or supplemental income.

Start small

If saving has always been a challenge, then start with something manageable. A small monthly amount can be put aside into a separate account you do not use. Give yourself small goals to achieve, like three monthly, then work on six months. Develop a savings mindset and create a habit.

Savings plans

Various kinds of savings vehicles or savings plan solutions can be used. Choose the one best suited to your needs. Be it a savings account, investment account or a tax-free savings plan. Your financial adviser can help you choose the correct savings solution according to your needs.

Types of Savings

Education savings plans – These are plans designed specifically to grow capital for funding education. For most expats living abroad, English-speaking private schools and universities don’t come cheap. ?A long-term education savings plan when children are little, could help fulfil dreams and allow them to attend any university they desire.

Retirement savings plans – These are aimed specifically for long-term growth to build a retirement pot to fund a retirement lifestyle.

Rainy day savings – These are savings one builds to cover emergencies like major roof repairs, medical expenses, etc.

Big item savings – Saving for a large item like a new car or a deposit for a home.

Savings apps – There are many savings apps available to help you on your way to becoming financially secure. Some apps like Catalyst offer a savings calculator and a variety of funds to invest in without any commitment to length or amount. You add money as and when you receive it.

By prioritising saving, you lay a solid foundation for financial stability, allowing you to confidently navigate life’s uncertainties and work towards your long-term aspirations.

Please note, the above is for educational purposes only and does not constitute advice. You should always contact your financial adviser for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.