The difference between starting to invest in your 20s vs 30s in South Africa

When you are in your twenties it’s easy to think you have all kinds of time to get your financial life together. Unfortunately, waiting can make a world of difference, says African Bank group executive for sales and branch network, Mellony Ramalho.

Ramalho explained that if you, for example, invested just R5,000 per annum from at age 20, and continued until 60 at an annual interest rate of 10.75%, you would have R2,716,043 in your bank account.

“In comparison, if you only started when you were 30 this amount would only be R948,604,” she said.

“It shows that by missing out on those 10 years you have actually cost yourself more than R1,767,439 in returns, even though you only skipped ten years of deposits,” Ramalho said.

Below Ramalho outlined additional tips for South Africans who are looking to invest at an early age.

Realise money is a tool

If you’re in your 20’s and ready to build wealth, it all starts with recognising the money you earn is nothing more than a tool to make smart choices regarding spending, savings and investing, she said.

Ramalho advised young adults to set both short and longer term investment goals and then plan accordingly.

Ramp up your saving for retirement

Your 20’s are a time when there are almost too many goals to save for. You may want to buy a home, purchase a new car, or travel the world – all at a time when you should also save for the future, said Ramalho.

Alex Whitehouse of Whitehouse Wealth Management says your best bet is to start investing gradually then ramp it up as you age. This will allow you to save for retirement while also letting you save for other goals.

“Start with just 1% of your income, then increase the percentage gradually by 1%.”

“By the time you reach your 30’s you’ll be saving 10% of your income.  By your 40’s, you’ll be saving 20% of your income. And if you get a raise every year, you may not even notice the difference.”

Ignore all the Joneses in your life.

Don’t try to keep up with Joneses – it only means you run the risk of spending money you don’t have, racking up debt, and of course putting off ‘boring’ responsibilities like saving and investing for the future, said Ramalho.

Choose your luxuries carefully and don’t fall into debt by financing everything with your credit card. Cash remains king.

Invest in yourself.

No matter what happens with the stock market or the price of bitcoin, the only place you have total control with your investments is in yourself.

“Invest in your personal, professional and financial growth; read as many books as possible and listen to advice from financial planners on radio and actively develop your skill set,” Ramalho said.


Read: How much you should be earning in your 20s in South Africa

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The difference between starting to invest in your 20s vs 30s in South Africa