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  • Writer's pictureSIphe Jabavu

WHY SAVING IS MAKING YOU POORER

One of the most defining moments that have shaped my thinking as far as money goes is when my dad told me as a teenage girl that "No man can do anything for you that you cannot do for yourself financially".



This is not a new or modern concept, think back to the olden days in the villages, women would be seen rising early to work in the fields planting corn and other organic food. Women have always worked and contributed to the material abundance of the home. The world we live in has changed completely, and so we need to keep up with the times to obtain the best standard of living for ourselves and our families along with our significant other.


Even the Proverbs 31 woman was hard at work.


"13 She seeketh wool, and flax, and worketh willingly with her hands.

14 She is like the merchants' ships; she bringeth her food from afar.

15 She riseth also while it is yet night, and giveth meat to her household, and a portion to her maidens.

16 She considereth a field, and buyeth it: with the fruit of her hands she planteth a vineyard.

17 She girdeth her loins with strength, and strengtheneth her arms.

18 She perceiveth that her merchandise is good: her candle goeth not out by night.

19 She layeth her hands to the spindle, and her hands hold the distaff."


I just mean!!! From the scripture above we see that this lady was involved in fashion design and merchandising, she was an importer and s exporter, she was a property investor. She had staff under her payroll. She was a manufacturer/supplier. She worked hard. We read in another part of the chapter that her husband was an affluent man, well respected in the city so she didn't need to work. But she chose to.


Now this is not a post about independence and doing your own thing as a woman, rather it’s the first of a series of blogs about getting our money right as women. I am all for my significant other providing financial support. Always, I welcome it. I’ve seen it with my parents, and I see nothing wrong with it.


However, as women. We do need to be savvy with money. We need to know what to do with money once we have it. Whether it’s a housewife allowance you get from your businessman husband, money from your own business, a salary, royalties et cetera.


A far back as I can remember, and I mean - high school and earlier- I have heard people consistently talk about how important saving is. “SAVE! SAVE! SAVE!” they said. Saving secures your future. Be wise with money and save.

When I was in varsity I often experienced the pinch of guilt whenever I would be reminded by the universe and its residents (friends, family, radio talk show et cetera) to save.

I decided to straighten myself out in my final year of varsity. I was due to work a week at one of the largest investment banks in SA for a week during June vacation so I decided to be a responsible young adult and finally open a… DRUMROLL PLEASE … savings account.


I put a small amount of money in there, something really small like R100 bucks. Walked away feeling good about myself. Decided to keep that money in there for a year without adding or withdrawing any of it. I did not read the fine print in the contract I signed to open the account, we really need to pay more attention to the stuff we put our signatures on. Therefore, I had no idea what I would be earning.


A savings account is an account in which we loan money to financial institutions, particularly banks. These institutions give us a rate of return quoted as a fixed or variable percentage of the money we’ve put into the account. They then take the same money and lend in to their other clients and charge those clients a higher interest rate than what they pay us.

This is how they make money off your investment. That’s called leveraged financing. Using money that belongs to someone else to make profit for yourself.

It may sound a bit unfair, but it is no different from the vendor you buy your wig or clothing from, they buy hair from a supplier, and charge you twice what they paid the supplier. Sensible business.


Let us back track to the R100 I saved back in varsity. Almost year later in my first year of employment I had a look at how much my money had grown. What I found made my jaw drop. I had made less than R3. My new balance was less than R103.

Now allow me to introduce the concept of inflation to the discussion. Inflation simply means that with each passing year, everything is more expensive than it was the previous year. Consider how the price of bread keeps gradually increasing. That’s not just Zuma, it’s inflation. Essentially, what you need to ensure is that the rate you are getting on your savings account or any investment, is higher than the current inflation rate.



Here is why. Suppose that an item, any item or group of items, like for instance a stick of lip gloss costs R100 today. If the rate on your savings account is 4% and inflation is also 4%. It means that a year later you have R104. Thanks to inflation, the lip gloss also costs R104 a year later. Now I am over simplifying things a bit, because inflation is calculated as the average increase in a basket of goods, Not just one item. But the gist of it is that you are not 4% richer than you were last year. You are at exactly at the same spot.


Interest rates that you pay the financial institution(on a loan, overdraft et cetera) will always include at least current inflation plus a real interest rate. Interest rates that you earn have no such guarantee. In fact, they are often lower than inflation.

Let us consider a final example with the same R100 saved.

The rate you earn on your savings account is 4%, but inflation is 5%. You are actually poorer than you were when you started saving That money can do less than it could when you first started saving. Therefore, it is making you poorer.


The truth of the matter is that you cannot save yourself to wealth.

What should you do about it?


The answer is that you need to invest! With saving, you are incurring no risk. You will likely never lose the R100 you saved. But you will also get very little out of it. If you want to paly it safe, ask you bank about different savings accounts and opt for the one with the highest return on it. They can go up to about 8%.


The basic idea is that the higher the risk, the higher the return. You need to invest in Financial Instruments with a greater element of risk to make any real money..

You can invest with a reputable Investment Firm and ask them to diversify your portfolio across different Investment Firms and instruments such as shares, bonds, property to mitigate this risk further.


Determine what your goals are, short-term vs long-term. The best thing I have ever done for my Finances has been to get a Financial Advisor. Get someone who is really passionate about what he does, who has a genuine interest in getting the best investment for you to align with your goals.


I have a Finance Degree and I went on to study a qualification in Financial Markets and instruments. I do have an in depth knowledge on different investments. But I am not a Financial Advisor, I am a Regulatory Accountant. I will provide my Financial Advisor’s details at the end of this blog as per the permission he has given me. He is certified and has access to the biggest Investment firms in the country.

He will do a free detailed analysis of your Financial needs and recommend you the best investments and within a week, you can be invested. Or whenever you want to start. He welcomes you ladies (or gentlemen) to drop him an email or give him a call. Just tell him you saw his details on the blog.


Before I tell you about my current favourite investment instrument. Let us hear what the bible says about investing.


“Charge them that are rich in this world, that they be not highminded, nor trust in uncertain riches, but in the living God, who giveth us richly all things to enjoy” – 1 Timothy 6:17


This verse tells us to not be arrogant or high minded, we must be humble. We must not trust in money, because it comes and goes. There’s a lot of risk in investing. We must trust completely in God instead.


My current favourite investment Instrument is a unit trust.


It works as follows:


You invest R1000 in a unit trust. In return, you receive a number of units, these are determined by the value/price of the fund on the date of investment.

If the value of a single unit in the fund is priced at R10 on the day you invest, you will receive 100 units for your R1000.

The price of unit trusts can go up and down, that’s the risk element, based on the price variations of the investments held by the fund you’ve invested in.

The unit price may increase to R13, resulting in the value of the 1000 units growing by R300, to R1300. However, the assets may also fall in value, the unit price would then drop in value too. Therefore, if the unit price decreases to R8, the value of 1 000 units will be R800. However, still hold on even when it drops, because it will most likely rise again.

Greater risk equals greater return.


We will be getting into more types of investments, including bitcoin in the coming money blogs.


In the meantime, get started, even if all you can do is R300 per month. Give my FA a call, and he will do a free consultation with you. The sooner you start the sooner your money starts working for you.


My Financial Advisor Contact details.

Liberty Holdings

Moleli, Stephen <stephen.moleli@liblink.co.za>


*disclaimer, This is not an ad. I have not been paid by any firm or individual to write this post. It is all my personal expertise and experience as a Finance Professional.


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