Saving does not only mean keeping money in the bank. While it is important to save money in a bank account, you can save in all areas of your life. Some people are of the opinion that having insurance policies in place are sufficient as a savings plan.
Remember though that savings and insurance differ in that they are different ways of accumulating money. A savings plan enables you to build wealth over a period, with regular amounts being put away on a monthly basis or weekly basis.
It is tailored to suit your individual choices and goals, how much you can afford and for how long you wish to save. You decide when you want to call up your funds. Insurance, on the other hand, is to protect you and makes up for a loss suffered in monetary terms.
Insurance, unlike a savings plan, is designed in accordance with the common needs of a group of people. Payout is indefinite and tied to a particular period, for example, death or disability.
Savings should be your first essential expense item when drawing up your budget. How much of your income you save shows how seriously you take your goals. Check out here for an easy to use (and free) spreadsheet budget template, so you have no excuse to actively monitor and control your money.
These days there are also apps you can use on your smartphone or if you prefer something to use on your computer, there are designated online services tailored to help you manage your finances better.
Don’t worry these are quite secure if you use them wisely. Here is a handy list of ten such online budgeting tools. Bear in mind though that the good old fashioned spreadsheet is often the best place to start since you can change it to exactly match your money situation.
Back to saving. A great way to start is to save about 10% of your monthly income. When you begin to save money regularly, you are laying the foundation for turning your future dreams into reality. Different people have different reasons for saving. Some save to acquire a home or car or for their children’s education.
Having savings put away places you in a powerful position, as you have the ability to buy something for less with cash than if you had to borrow money or use credit. Also, it frees you from worrying about unexpected expenses or emergencies, and this money is immediately available.
You must shop around for the best interest rate possible. Interest rates differ from institution to institution. The reason most people in South Africa take out insurance is also to provide for future needs. If you were to die, your dependents would still need money for bond repayments, health care, education and so forth. They would still require money equivalent to your salary to survive, and the best way to provide for this is to take out insurance.
Insurance paid out in a lump sum will provide a large sum of money when it is needed most. But remember that each of these, both insurance and saving, serve a separate function. In the current economic situation saving money as much and as often as you can represents the best possible chance you can give yourself and your family.