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Saving tips for young professionals entering the workplace

The temptation to buy a new car might dissipate when considering what else can be achieved with a regular salary.
Decisions, decisions: a little forethought can go a long way. Image: Shutterstock

Getting a new job can be daunting enough without having to stress about the future and whether you are doing enough to save for it. 

Add all the different types of investments and saving schemes and it’s enough to throw you off your plan to be financially savvy.

John Manyike, head of financial education at Old Mutual, has simple saving and investment tips to help point young professionals in the right direction. (Note these are starting points and each point requires careful consideration).

He says it’s important to first understand that saving is intended for short-term goals, while investing is about putting money aside for the longer term.

Beyond that, he has five tips for those wanting to start making decisions that will pay off in the long term. 

Property before a car

Even though for many young people it’s tempting to purchase a vehicle once they secure their new job, they should consider buying a property first.

Here’s why: the value of a vehicle depreciates the moment you drive it out of the dealership, whereas the value of property appreciates over time.

Property is a valuable asset for any person to own.  

“If you were doing a comparison between an employee who has bought a car and one who has bought a house, I would say the one with a house is better off,” says Manyike.

The cost of property differs from location to location, so prospective buyers should consider what features they want in their property, then look at different areas to see whether they would prefer a small apartment in an upmarket area, or a bigger place in a less expensive suburb.

Retirement savings

One of the hardest things to do is talk to young people about saving for retirement, because they view it as something that is far-off. What they need to understand about retirement savings is that time is their best friend. When they take up a retirement savings product when they are younger, they will pay lower premiums as opposed to when they are older, because they get charged for cost-of-delay.

Manyike advises starting retirement savings as soon as possible.

Consider your lifestyle when choosing a bank account

It’s important to look at the lifestyle you live and to choose the right bank account. If you make cash withdrawals every week then certain accounts won’t work for you. You also need to take into consideration the banking fees with each bank and type of account.

“I would suggest that young professionals make use of digital banking because it is the future, because it works out cheaper,” says Manyike.

Choosing cheaper banking services goes hand-in-hand with saving money for other things you might need.

Tax-free savings

“I suggest that young professionals also enquire with their banks or personal advisors about tax-free savings,” says Manyike. The good news is that Treasury has made it possible for people to save up to R33 000 per annum tax-free — so look at how you can capitalise on that.

The path to financial success depends on the decisions one makes along the way. Getting off to a good start could pay huge dividends in the years to come.

The views and opinions shared in this article belong to their author, cannot be construed as financial advice, and do not necessarily mirror the views and opinions of Moneyweb.

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