Our financial needs change significantly as we enter different stages of life. While we all work hard and deserve to enjoy our money, it is also important to constantly re-assess savings and investment plans.
“When focusing on changing needs, we should never lose sight of the fact that life is for the living,” says Angela Mhlanga, Head of Financial Consulting at Standard Bank. “Those who get into good financial habits from an early age won’t have to constantly worry about money in their later years.”
Managing money wisely should begin in your twenties
When you’re young and temptations are everywhere, it is easy to fall into the trap of spending money you don’t have, lured by the ease of buying on credit. But consumers in their twenties really do need to understand the basics of money management, including budgeting.
It is essential to understand what buying on credit really means to get into good habits from the start.
“So while living life to the full, twenty-somethings must devote some time to good financial planning. It’s an ideal time to start talking to bank consultants and financial planners,” says Ms Mhlanga.
The twenties is also the time for people to begin long-term planning, set down some life goals, and start building capital towards achieving these. Financial planners can also help provide advice on disability or dread disease insurance. Your pension fund should also be started when you get your first full-time job.
Major expenses during this decade of your lifetime may include buying a motor vehicle or investing in a home. Both of these options may require bank loans and will have implications for future financial status.
The thirties is an age for good, honest savings
During one’s thirties, life usually becomes a little more serious and this is usually the stage during which most people begin considering saving in earnest for the first time.
Consumers need to choose savings products and financial planning options that best suits their needs. A bank financial planner can help thirty-somethings choose between fixed deposits, high-risk versus low-risk investments, unit trusts or equities, depending on goals and risk appetite.
Thirty-somethings also need to understand pensions and provident funds, and they especially need to start making their own arrangements for retirement, if these options are not part of their employment packages. It is also important to save a bit more for medical requirements for when you are older and medical care becomes important.
Insurance – both life and short-term – becomes even more important as people buy bigger homes, get married and start families. Marriage and children should always be triggers to ensure that you have adequate life insurance, as loved ones should be looked after in the case of unexpected illness or death.
The thirties is also the time to start saving for your children’s education. Today it is essential that children get the best school and tertiary education possible to ensure employment opportunities down the line.
“Education costs can be steep and continue to mount, so you do need to plan how you will finance your children’s education,” advises Ms Mhlanga. “Again, the bank can introduce you to the world of endowments, savings plans, unit trusts and so on.”
When you’re forty, enjoy the benefits of your early efforts
Those who embarked on good financial planning earlier in life will start reaping the rewards in their forties and can start to enjoy the luxury of re-investing income from their savings. This is the ideal time to plan to pay off your home and step up your retirement planning.
Although retirement age is flexible these days – with many electing not to retire until much later than the traditional 60 or 65 years of age – it nevertheless needs careful planning. If you wait until your fifties to save, it’s usually too late to build up enough capital to ensure you have a happy, stress-free retirement.
“If you haven’t started serious planning to fund your retirement, you must address this in your forties. If you wait any longer it will be too late,” warns Ms Mhlanga.
The fifties – a time to reflect and prepare for retirement
Your fifties should be a time for reviewing your financial plans and looking to retirement. You need to know about the most effective ways of topping up your retirement savings and should also focus on paying off all major outstanding debts.
This is also the age at which you need to ensure you are adequately covered for worst case scenarios such as death, critical illness or disability, and to give some thought to estate planning.
Retirement is when you should enjoy stress-free living as you reap the benefits of all your hard work during your younger years. You need to invest your retirement savings in such a way that they continue to grow, allowing your income to grow in line with inflation.
It is also the time to re-visit your will and other considerations which would involve some lifestyle changes as you move to a smaller home, or retire to a different town.
“Getting the right advice on saving and planning – no matter what your life stage – is as easy as walking into any Standard Bank branch, where a financial planner will be able to advise you on how to best manage your money. We can help you decide how to get the most out of the money that you work so hard for,” concludes Ms Mhlanga.