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How to Save Money: It’s A Mindset

By Bidvest Bank
For many of us, saving money is a luxury that we’ll do “when we have money left over”. No matter how much we earn, it seems that between a bond, a car repayment and everything in between, there’s never much extra at the end of the month to put away. But saving money is incredibly important for your financial security. So what’s the best way to do it? It’s all in the mindset, says Jill Murtagh, Head of Payments and Settlements at Bidvest Bank. We sat down with her to get tips on how to save money effectively.

Jill, let’s start at the beginning. Why should you save? 

There are two main reasons to save. Firstly, you may need access to funds unexpectedly, such as if your car breaks down, or if you have a health emergency and need to pay for treatment upfront. The other reason is more long term – you’ll need to have savings to live on for when you’ve retired. 

Why is it important to start saving as early as you can?

The main reason for saving money is the power of compound interest. What this means is that interest builds on interest and so your money grows at an increasingly faster rate, the longer you’ve saved for. So let’s say you put away R500 each month starting when you’re 30 years old. By the time you’re 40, you would have R83,259,07 in the bank. However, if you’d started doing this 10 years earlier when you were 20, you’d have a whopping R233 830,65 in the bank. This simple illustration shows just how much more you end up with, the earlier you start saving. 

Most of us feel stretched at the end of month and don’t feel that we can save. How do we get around this?

The key here is to change your mindset from, “I’ll save money when I have extra cash” to “I’ll save first and then pay for everything else after that.” Many people say that they can’t afford to save but the truth is that you can almost always “find” money. For example, let’s say you go out to dinner three times a month and spend R300 each time. That’s R900 extra that you’re spending on something that isn’t a necessary expense. If you could, for example, give up one of those dinners a month, you’d have R300 extra to put away each month. 

What’s the best way to make sure you continue your commitment to saving?

The most effective way to save is to put a debit order on your bank account into your savings account the day your salary is paid in. That way, you’ll hardly even notice that the money was there in the first place – and you’ll be committing to putting money away each month. 

How much should one be saving each month? 

Financial experts say that you should save 10% of your salary – so, if you take home R20 000 a month, you should be saving R2000 a month. Even if you can’t commit to this percentage, start with an amount you’re comfortable with – even if it’s not that much – and then increase this amount by 10% every three months. Note that this increase isn’t once a year, as then you may feel it’s too much of a jump. Doing this will feel manageable and it will help you benefit from the added compound interest. 

Any last tips on how to save money? 

It’s important to think about saving money differently. Yes it’s about putting away money when you really need it, but it’s also about building wealth over the long term. So you need to switch it around from being a negative action to a positive one: saving should feel like you’re investing in something, rather than “losing” that money every month. 

Want to maximise the amount you’ve already saved so far? With the Bidvest Bank Fixed Deposit Account, you can make your money work harder for you. Simply deposit any single amount of money (from a minimum of R10 000) for a fixed amount of time, and you’ll get a guaranteed interest rate that’s higher than if you left the money in your normal bank account.