Presented by 10X Investments

Ask better questions (from one millennial to another)

As South Africans prepare to celebrate Youth Day, Asavela Gwele, Junior Investment Consultant at 10X Investments, urges her contemporaries to start engaging with their finances in a smarter way.

Asavela’s 10 questions:

  1. What do I want and what do I need?
  2. How am I going to meet those wants and needs?
  3. Why say no to getting tax back from the government?
  4. How do I get more out of my company pension savings scheme?
  5. Do I want to be dependent on my children?
  6. Why start saving now?
  7. How do I make my money work harder for me?
  8. Do I want to leave it until I turn 65 to discover that I won’t be able to retire?
  9. How much of my money am I prepared to pay away in fees?
  10. How many Yolos will I be able to buy on a Sassa grant?

Generally speaking, asking questions is a good place to start.

Our generation is fortunate in that we have so many resources at our fingertips. Don’t be afraid to do some research.

You will find that there is so much data and information just a few mouse-clicks away.

Ask yourself …

What do I want and what do I need?

The pleasure of wearing that fab new suit or driving a new car will be nothing compared with the peace of mind you would get from building up an emergency fund of savings.

Look around and see how others are suffering because they didn’t have anything saved for a rainy day.

Also, just think how your future self will thank you for setting yourself up for a decent life in retirement.

Why not join the 1% and take charge of your retirement saving journey. Start by creating a savings plan using the free online calculator Retirement Calculator | Investment & Savings Planning | 10X

How am I going to meet those wants and needs?

There are different savings products for different goals. Whatever you can save – whether it is R500 or R5,000 – think about it carefully, make the most of tax breaks and make sure you are getting the lion’s share of any growth your savings generate.

Why say no to getting taxes back from the government?

The government offers tax breaks to get people saving. Not using tax relief available via a retirement savings vehicle and a tax-free savings account is effectively saying no thanks to the government’s offer to return some of the tax you have paid.

Money you put into a retirement savings fund attracts various forms of tax relief:

  • Up to 27.5% of your taxable income, up to a maximum of R350 000, is tax deductible.
  • You do not pay tax on RA investment returns, such as interest income, dividends and capital gains.
  • You can take up to a third of your RA as a lump sum when you retire (or all of it if it’s worth less than R247,500), with the first R500 000 being tax-free.

What you need to know about your Retirement Annuity and tax

How do I get more out of a company pension savings scheme?

Some employers offer a corporate retirement savings scheme, which provide employees with a lump sum payment or a regular pension income when they retire (or their beneficiaries, should they pass away).

Membership of such a scheme makes saving easier because contributions are deducted from salaries upfront, eliminating the problem of not having enough money to save at the end of the month.

You also should have the comfort of knowing that your employer monitors the performance of the fund’s service providers and very likely gets a group discount on the fees charged.

Free downloadable ebook: The South African guide to corporate retirement funds 

Do I want to be dependent on my children?

Only you can answer this, but your children might want a say.

Remember they might not be able to afford to support you while bringing up your grandchildren. Sure, we don’t mind paying “black tax” to help our families, but the onus really is on each of us to save enough money to provide for this stage in our life.

There is nothing stopping your children spoiling you, of course.

Why start saving now?

The money you save earlier in your working lifetime (ie stays invested for the longest time) works the hardest, thanks to the miracle of compound growth.

Compounding means that you earn a return on your savings as well as a return on the returns.

Like a snowball rolling down a hill and picking up ever-more snow with every rotation, your savings pot will grow faster as it grows bigger over the years.

Give your savings enough time, earning returns on returns, and your nest egg will grow into a bigger pot than you might have been able to imagine.

How do I make my money work harder for me?

To give your money the best chance to grow you will need to invest some of it in the stock market and give it time to grow.

There will be some ups and downs, but if you are investing for anything longer than five years you have time to ride out any volatility.

Your best bet is to buy into a well-diversified high equity fund that charges low fees and prepare yourself to ride out any tough times.

Do I want to leave it until I turn 65 to discover that I won’t ever be able to retire?

Make sure you know how much you’re on track to retire with by creating a basic retirement plan.

A good plan will help you set a goal (how much you need to save in order to maintain your desired lifestyle post-retirement) and tell you what you need to do to achieve that (how much you need to save each month).

Put some basic information into the 10X retirement saving calculator and a personalised retirement savings plan will be generated in no time at all.

How much of my money am I prepared to pay away in fees?

Don’t be one of the many people who forfeit a large chunk of their savings to high fees.

Costs can include advisor/broker costs, administration/platform costs and investment management/fund management costs.

South Africans pay, on average, 3% of their total savings balance in fees every year, compared with 1% at 10X.

Losing one or two percent extra will compound over the years to become a large hole.

You can get everything else right and high fees can still sink the ship.

How many Yolos will I be able to buy on a Sassa grant?

For those who are spending every last cent and saving nothing because “You Only Live Once (Yolo)”, the state old age grant of R1,985 per month (2022) is not going to maintain the Yolo lifestyle.

Once you have asked yourself these questions I doubt you will ever again wonder, “Why should I bother?”

Click here to use the 10x investment calculator.

The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. 10X Investments is an authorised FSP (number 28250).

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Ask better questions (from one millennial to another)