By Lehlohonolo Lehana.
July is National Savings Month, and the middle of the year is a good time to take a real look at our finances while taking stock of our savings journey. The economy is tough for everyone at the moment, and in times of financial need, the temptation to access savings can be strong.
“Times are trying for a lot of people right now; however, it is crucial for those who have managed to save and invest some money to stay invested so as to ensure long-term financial security and stability,” says Kobus Kleyn, Liberty Advice Partner.
He says that in tough times people should strike a balance between short-term needs and long-term goals. While immediate financial challenges may require attention, it is equally crucial to consider the long-term implications of decisions related to using money from savings.
Kleyn says it’s important to think ahead in these situations. “While adjustments may be necessary to address immediate concerns, it is vital to avoid making impulsive decisions that could compromise financial security in the long run.”
Kleyn points out that our savings needs change during different stages of our lives, highlighting the need for an ongoing commitment to savings and investements, retirement planning, and strategies to manage financial challenges.
“As our lives evolve, our savings priorities change. So, one way of offering savings advice is to break it down into life stages,” he says.
Young Adults Aged 25-35
Maybe you are in the early stages of your career, so it makes sense to prioritize immediate financial goals such as paying off student loans, purchasing a vehicle and home, or starting a family. However, it is crucial to instil a habit of saving early on, even if the amounts are small. By starting to save in your 20s or 30s, you can benefit from the power of compounding, which is when you benefit from accumulating interest earned over the years. It’s important to state that saving for retirement at an early stage allows for a longer investment horizon, maximizing the potential returns and reducing the burden of funding retirement in later years, which is always a good idea.
Middle-aged Adults Aged 40-55
For people like this, and if you are one, you’ll know the focus shifts to balancing multiple financial responsibilities. You may have mortgages, children’s education expenses, liabilities, and other financial commitments. Saving for retirement becomes increasingly important during this period, as time is still on your side, allowing for a longer accumulation phase. It is crucial to strike a balance between meeting current financial needs and consistently contributing to retirement savings before it is too late, while paying off debt.
Pre-retirement Adults Aged 55-65
If you are nearing retirement, your focus will want to shift toward ensuring you have sufficient savings to maintain your desired lifestyle and cover healthcare costs in retirement. At this stage, the priority is often capital preservation and protecting your accumulated wealth while boosting retirement funding with the help of SARS subsidies. It becomes essential to gradually transition investments to more moderate conservative options to minimize market volatility risks. However, it is important to strike a balance between moderate conservative and conservative investments and maintaining a growth component to keep up with inflation. Taking advantage of equity investment up to 3 years before retirement is also critical.
The bottom line: Dealing with tough times
We all know that during these difficult economic times when many of us are struggling with bills, that it can be tempting to access money from things like retirement funds or any other long-term savings.
Kleyn offers this advice: “Before accessing long-term savings, explore other options to find money. Start by creating a detailed budget to identify potential areas for cost-cutting or reallocating funds. Maybe even look for opportunities to increase income through side hustles, for example. If you must borrow to survive, your bond would normally be the most cost-effective option, if you use it for a short period and catch up on bond payments again,” he says.
But most importantly he advises getting help from a financial adviser who can provide guidance tailored to individual circumstances.
“Speaking to someone to find ways to cope with your financial dilemmas is key. There is always a way to figure things out. This allows individuals to focus on other aspects of their lives, knowing that their financial foundation is secure,” he says.