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Investing in your future, the importance of savings

In a world marked by constant change and uncertainty, understanding the true essence of wealth is crucial. As Louis Fourie, one of the first recipients of Beeld’s Economist of the Year award and the co-founder of the Logic Filter and Citadel eloquently says, “Take tomorrow’s money off the table, fast; be value-conscious when you spend; never try to borrow to prosperity and be debt unfriendly; and own assets that serve you”.

Many graduate professionals today find themselves in better positions than their parents and grandparents, thanks to intergenerational wealth. Even if that wealth is not substantial, the opportunities it provides can be transformative. 

But how does one ensure that the benefits of wealth continue across generations, positively impacting not only one’s family’s well-being but also the greater community where one lives and works?
One way is to manage one’s income prudently to allow wealth to grow – or simply put, to embrace financial wellness.

Financial wellness

These days, there is an intense focus on various forms of wellness, including physical, emotional or intellectual, to name but a few.
But what about financial wellness?

Interestingly, the connection between financial wellness and other dimensions of well-being is profound. Paula Thielen, Forbes Councils Member, writes in March 2023 for Forbes that, “Mental health and financial well-being are two important aspects of our lives that are often viewed in isolation from each other. However, the truth is that these two elements are deeply intertwined and play a crucial role in determining our overall health and happiness”. She and other authors write that stress about finances can lead to chronic health conditions, digestive problems and insomnia. 
When it comes to the link between financial and mental wellness, research by the Financial Health Network in the US shows that financial challenges are often associated with mental health challenges. These studies have concluded that improving financial wellness can positively impact one’s overall health and well-being.

One effective way of enhancing one’s financial wellness is simply by implementing a savings plan. Even in small amounts, saving can significantly contribute to financial wellness. Savings not only build a safety net for unforeseen expenses but also instil a sense of financial discipline that benefits all aspects of one’s finances. Over time, a savings habit can lead to a more secure financial future, reducing stress and improving overall well-being. 

Synergising savings strategies

It is not just about having synergy between one’s savings habits and one’s lifestyle, it is also about achieving synergy in one’s financial strategy – specifically one’s savings strategy. When one thinks of savings, it is much more than just having a savings account for the sake of having one. Savings can – and should – be very specific. 
Emergency fund: This is a savings fund for those rainy days. It is said that one should have at least three times one’s monthly salary saved in such a fund. Having six months’ worth of savings is even better. 
Retirement savings: The importance of saving enough for one’s retirement cannot be stressed enough. It is said that one needs to save at least ten times one’s annual salary at the time of retirement to be able to uphold one’s lifestyle in one’s later years. To do this, one needs a long-term strategy, saving throughout one’s career. 
Investment portfolios: As per Fourie’s advice, it is not just about saving money, it is about your money working for you. That is why it is important to consider carefully how you invest your money. For most people, this is a daunting task, so there are specialist investment advisers who can assist and ensure diversification across asset classes, balancing risk and return, tailored to individual risk tolerance and investment horizons.
Insurance: As much as one might not consider having insurance as a “savings” facility – adequate insurance cover is crucial for protecting against potential financial setbacks and preserving accumulated wealth. Paying short-term insurance premiums, for example, can also be seen as part of one’s emergency fund where one saves towards those “rainy days” when an accident happens and need to pay a large sum for repairs instantly.

PPS’s role in assisting members on their savings journey
PPS provides its members with various savings options, including tax-free accounts, retirement annuities and investments. A standout feature is the notional PPS Profit-Share Account™, which significantly benefits members’ financial well-being. The 2023 Financial Results highlighted how members could accumulate substantial amounts in their Profit-Share Account™ by retirement, offering various uses, including lifestyle support or further investment opportunities with PPS Investments. Additionally, retired members can use these funds to cover premiums for PPS Insurance products, easing financial burdens and ensuring continued protection.

 

_{^{* Members holding qualifying life-risk products share in the profit and the loss of PPS through the notional PPS Profit-Share Account™ and past performance is not necessarily indicative of future performance.
** Disclaimer: Kindly note that this does not constitute financial advice the information provided is purely informational. In terms of the Financial Advisory and Intermediary Services Act, an FSP should not provide advice to investors without an appropriate risk analysis and thorough examination of a client’s particular financial situation. The information, opinions and communication from the PPS Group or any of its subsidiaries, whether written, oral or implied, are expressed in good faith and not intended as investment advice, nor do they constitute an offer or solicitation in any manner. PPS Ltd is a licensed insurer conducting life insurance business, a licensed controlling company and an authorised FSP.}}