When you’re young it is so easy to become lost in the here and now. Focusing on studying, getting a job, climbing the career ladder and living the life you’ve always dreamed about. You tend to forget to think about the future, to plan for yourself in thirty, forty, fifty years.
Earning money is great. But you can’t just think about spending it, you also have to think about saving and making responsible decisions for your financial future. The money which you save in your twenties, thanks to the magic of compound interest, is worth more than money which you’ll save later in life.
Now is the time to think very seriously about saving as much money as possible. These are just some of the worst money mistakes young people are making right now which are preventing them from saving.
Paying too much for cars and cellphones. There’s a perception that we must have a new cellphone every two years, we must upgrade our cars every five and we must wear the latest fashions every season. There is far too much emphasis on “now” and “new”. Cars and cellphones are examples of items which begin to depreciate the minute you buy them. Rather search for second-hand options, or buy new and then keep them for many years.
Not saving enough for retirement. When you’ve just started working, the last thing on your mind is saving for retirement. But now is actually the ideal time. If you start saving from your first payday, it will become a habit you’ll keep for the rest of your life. And this could not be more important for young South Africans. Research shows not even 10% of South Africans will be able to retire comfortably. Financial advisors agree that by the age of 30 you should have at least one full year’s salary saved. By the time you’ve been working for 10 years, you should have two year’s salary saved. It is recommended you save a minimum of 10% to 15% of your salary each month. That might seem like a lot, but the sooner you begin, the easier it will become.
Not covering yourself. When you’re young, you feel invincible. Like nothing could harm you or have a negative impact on your life. But bad things do happen, every day and to everyone. Chances are something could happen to you. This is why you need to have some form of medical cover in case of an accident or illness, legal insurance should someone sue you and life insurance to look after your loved ones after you’ve died.
Waiting too long to buy a house or buying a house too soon. This may sound counterintuitive but both of these are equally bad. If you are paying a fortune in rent and can afford to buy a home, it may be better to buy property. But if your rent is affordable and you’re planning to move around in the next few years, renting a home may be your best option. This is an incredibly personal decision and only you know what the right answer is for you.
You’ll never be able to put a price on the peace of mind you’ll feel knowing you’re in a good financial position and are working toward your future. If you start making informed financial decisions today, your future self will thank you.