“Investing is only a rich man’s game” or “I’m not smart enough” are just some of the reasons used by South Africans to explain why they don’t invest. These misconceptions can stop you from reaching your financial goals and need to be debunked.
In a nutshell, the five myths sound something like this:
1. ‘I can’t invest while living my best life’
Many people believe they won’t be able to maintain their current lifestyle while also investing. This fear of having to surrender the fun things in life is particularly strong when there are exciting and expensive events coming up, such as a wedding or a dream holiday.
The truth is that you don’t need to compromise your quality of life to become an investor. It’s possible to invest as you spend. There is an easy option for people who would like to become an investor. We have developed a transactional account that enables you to select an amount between 5% and 15% of every purchase you make. It’s a ‘swipe and invest’ account that puts the invest portion into an interest-bearing unit trust account in your name. Instant investing.
2. ‘I don’t know how to invest’
Financial language can be confusing, and many South Africans assume you need a lot of financial knowledge and expertise to start investing. The truth is that there are investment products designed specifically to keep things simple and easy to manage. Making use of financial tools will also help you understand investing without the confusing jargon.
3. ‘I don’t have the discipline to invest’
Putting money into a monthly investment usually takes discipline if you have not committed to a monthly debit order. But the good news is that some investments do the work for you. The example of the transactional account mentioned earlier combines a spending and savings functionality so that every time you swipe your card, you automatically invest a set amount. This works really well for anyone who battles with the discipline of saving.
4. ‘I can’t afford to invest’
Everyone knows that the wise thing to do with spare money is to first pay off your debt and then to invest. However, in these tough economic times, many South Africans are feeling the pinch and feel they can’t afford to invest. This is where “forced” or “semi-automatic” savings or investments can be very beneficial, as it enables us to accumulate savings while we go about our daily lives. Money grows through compound interest, so the sooner you start, the more you will have in the end. Do some research into the benefits, fees and charges of the various options available to find the investment vehicle that suits your needs best.
5. ‘I don’t have 32 days to wait to access my investment’
The terms and conditions of savings accounts vary, so it’s important to establish which terms are most suited to your needs. For example, a 32-day call account has many advantages, but it can restrict your access to your funds. If quick-and-easy access is important to you, choose an investment account that allows you to make withdrawals, as and when you need them.
Shirley Smith is chief operating officer at Old Mutual Finance.