The real meaning of saving - in the spirit of National Savings Month

by Pieter Koekemor - Coronation Head of Personal Investments

When it comes to the difficult choice between spending on something you really want, or saving the money instead, you may expect that an investment manager would say it’s always best to forego short-term indulgences in favour of investing for the long-term, right? You might be surprised to hear us say, not always!

As part of National Savings Month, we are encouraging South Africans to save more by putting money aside every month instead of overspending it on unnecessary things. Our call is for people to scrutinise their saving and spending habits and shine a light on the unseen ways in which we spend money unnecessarily and instead rather invest it for growth.

The problem is that we are constantly bombarded with advertising messages telling us how we can "save" if we buy something. Examples of this include when we are enticed by sales which are 'for one day only', 'buy two get one free' or 'only while stocks last'. So, it's easy for us to fall prey to spending money on things we don't really need out of impulse or convenience. When you are lured into buying unnecessary items, the unseen truth is that you are not saving, you are just spending.

But we also know that it's important to have balance

We all want to live our lives to the full and spending on valuable experiences can be positive. After all, the primary reason for investing is to have more spending power later, so striking a balance between considered spending today and tomorrow contributes to a well lived life.

But before you book that overseas trip for you and your family, take note of some important caveats. Incurring debt to support a lifestyle beyond your means, or not thinking at all about building your balance sheet is not wise. Your objective should be to balance the needs and wants of today with the ability to cope in emergencies and prepare for the big future expenses such as your children's education and your own retirement.

So when is spending better than saving?

When your basic financial needs are met and you have extra money, purposeful spending on memorable life experiences may make more sense than impulse buying of unnecessary material things. You can't put a price on the memories you build up over time. Investing in memories and time with those close to you is important for wellbeing and happiness. When you eventually retire, you'll not only have built up a healthy retirement investment, but also a wealth of memories with family and friends in whom you have invested time. It will make your life that much richer.

National Savings Month is a good time to be mindful of how we can be more careful about what we spend our money on and to put away any extra that we can for the long term. If you find yourself tempted into spending some of your hard-earned money on things that you don't really need, just take a moment to consider what you could do with that cash if you were to invest it. Allow your money to grow until such time that you can comfortably afford experiences that you truly desire.

That is the real meaning of saving.

This article was published on the Jewish Life Magazine on 18 July 2019.

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