Teaching our children healthy financial habits.

Francois le Clus • October 7, 2024

Habits, as defined by the Oxford Dictionary, are “a settled or regular tendency or practice, especially one that is hard to give up.” Good habits can make a huge difference in how we live, and they often become second nature. Think about the simple act of closing the garage door when leaving for work—it’s automatic. Now, imagine if your financial habits could be just as effortless.

Building strong financial habits can make managing your money easier and improve your financial health. Successful investors follow key principles: they know how to save and invest, practice good habits, and steer clear of costly mistakes.

 

Take Control of Your Money

 

From childhood, allowances teach us the basics of money. Setting a budget for kids helps them make smart choices. If they spend their pocket money too quickly, they learn the value of saving and the importance of waiting for what they really want.

As we grow older, these early lessons shape our money habits as adults. Whether you’re paid weekly or annually, the first step to financial control is knowing the value of your income. A budget helps you make the most of what you have.

If you’re new to budgeting, start now. Don’t guess with your expenses—use one of the many budget templates available online. The key is building the habit of budgeting and sticking with it. Christine Benz from Morningstar has a great guide titled How to Assess Your Cash Flows and Create a Budget to help you get started.

 

Keep It Simple With Basic Financial Rules

 

The simpler your habits, the easier they are to maintain. For your finances, stick to these straightforward rules:

 

  • Spend less than you earn.
  • Pay yourself first (save), then spend what’s left.
  • Save for big purchases rather than using credit.
  • Pay off debt quickly.
  • Have an emergency fund.

 

 

Start Early—No Matter How Small

 

Some people think they need a lot of money to start investing, but even small amounts grow over time, thanks to compounding. The sooner you start saving and investing, the better. Even if it’s just a little, investing early sets you on a path to accumulate wealth over time.

Starting small helps you build the habit of saving, which can become one of your strongest financial tools. It’s better to start now with what you have than to wait and save larger sums later.

 

Time Is On Your Side

 

When it comes to investing, young people have an advantage—time. Even modest investments can grow significantly over time due to compounding.

For example, a 22-year-old who saves R200 a month at a 5% annual return could have over R362,000 by age 65. In comparison, someone who waits until 35 and saves R300 a month at 6% will have just over R300,000 by the same age. Those extra years make a big difference.

 

Understand the Power of Compounding

 

Money saved in your 20s and 30s has decades to grow. For instance, R1 growing at 6% annually becomes R10.30 in 40 years. The same R1 will only grow to R3.20 after 20 years. The earlier you start, the more your money will grow, reducing the amount you’ll need to save to reach your goals.

 

Teach the “Rule of 72”

 

A great way to explain the time value of money is the "Rule of 72." Divide 72 by the interest rate to see how many years it will take for your money to double. This concept helps people understand why starting early is so valuable—even small investments now are more beneficial than larger ones later.

 

Avoid Lifestyle Inflation

 

As your income increases, it’s tempting to spend more. While it’s okay to reward yourself for hard work, be careful not to let your spending grow faster than your savings. The more you spend, the more you’ll need to maintain that lifestyle in retirement.

A smarter approach is to live conservatively. By keeping your spending in check and avoiding unnecessary debt, you can save more while you’re working and create a more affordable lifestyle for retirement.

 

In Conclusion

 

The key to financial success is staying motivated and consistent. You’ll have setbacks, and that’s okay—just keep moving forward. Share your goals with your family to stay accountable, break your goals into small steps, and celebrate your progress along the way. With patience and dedication, you can build better financial habits and enjoy a more secure future.

Should you withdraw your Pension and pay off your home?

By Francois Le Clus • May 28, 2025
Should you withdraw your Pension and pay off your home? It's perfectly normal to ask whether you should use your pension to pay off your home when leaving an employer. This decision involves weighing the tax on the withdrawal, the interest saved on your bond, the future growth of your pension fund, and the contributions needed to catch up. Example: Anne is 40 years old with a pension fund worth R3,500,000. She bought a home 10 years ago for R3,000,000 and bonded it over 20 years at an 11% interest rate, with monthly repayments of R30,965. After 10 years, her outstanding bond is R2,258,225. If she withdraws her pension, she’ll receive R2,408,300 after tax—enough to settle the bond and have some cash left over. By paying off the bond early: She saves R1,467,919 in interest. She frees up R30,965 in monthly cash flow. However, if she keeps the money invested, her pension could grow to R37,921,470 by age 65 (assuming 10% annual growth). To match this value after using her pension to pay off the bond, she’d need to invest R28,580 per month for the next 25 years. That’s R2,385 less than her current bond repayment, so she does save monthly—but only for the next 10 years. After that, she’s committed to investing R28,580/month for 25 years to break even.  Not everyone’s calculation is the same and there are endless amounts of permutations to this calculation, but it’s important to note that you need to consider all of these factors when making these crucial decisions.

GEWOONTES VIR GELUKKIGE AFTREDE

By Riaan Botha • May 28, 2025
Ons ontleed watter gewoontes meewerk om ’n gelukkige aftrede te verseker. Hierdie maand bespreek ons hoe om gesond te lewe tydens aftrede. Mediese kostes verhoog hoe ouer ons word. Die koste van ’n mediese fonds verhoog jaarliks met meer as die inflasiekoers en mediese uitgawes sal in die toekoms ’n al groter persentasie van ons persoonlike uitgawes vereis. Dit is daarom belangrik om so gesond as moontlik te leef. Hier is verskillende stappe wat gevolg kan word om gesond oud te word: Eet gesond. Moenie oorgewig wees nie. Word sterker deur oefeninge te doen wat jou spiermassa behou. Doen jaarliks mediese ondersoeke om te bepaal hoe gesond jy is. Beskerm jou gewrigte en beenstruktuur deur krag- en rek-oefeninge te doen. Verminder rook en alkohol-inname om jou kanse van kanker en ander siektes te beperk. Indien jy ’n familie-geskiedenis het van siektes soos kanker en hart-toestande. moet jy vir gereelde mediese toetse gaan om vroegtydig te bepaal of jy nie die siektes onder lede het nie. Verbeter jou liggaamsbalans deur oefeninge te doen soos om op een been te staan terwyl jy jou tande borsel. Hierdeur verseker jy dat jy nie gereeld jou liggaamsbalans verloor en val nie. Studies het bewys dat dit help om jou fisieke en geestelike gesondheid te behou deur sewe tot agt ure per nag te slaap. Hou jou brein-funksie of kognitiewe vermoë in ’n goeie toestand deur brein-oefeninge te doen, soos om nuwe stokperdjies te beoefen of memoriseringsoefeninge te doen. Volg ’n aktiewe sosiale lewe. Studies het getoon dat mense met ’n aktiewe sosiale lewe minder geheue-probleme ontwikkel. Hulle het ’n verminderde kans om eensaam te voel en depressief te word (Health Connection, Cooper, University Health Care, 9 September 2024).