Creating an effective yearly savings plan

If you know what to budget for, saving money each year is that much easier. Here are ways to do so.

According to the Finscope 2011 results, a large number of South Africans (around 66%) do not save, and according to the South African Reserve Bank Bulletin, SA’s gross domestic savings have fluctuated between 14% and 16%, while household savings have fluctuated between 2.7% in 1991 and -0.2% for the first quarter of the year when it comes to disposable income. These figures all show a lack of savings in many households.

Five ways to create a yearly savings plan

Lezanne Human, the CEO of Investments Products at FNB, offers the following ways to effectively create a yearly savings plan:

1. Budget
Before you start on your savings plan, compile a budget. You need to understand what money flows into your account, compared to what you spend before you can make any decisions on your savings.

2. Pay yourself first
Savings should be something you think about every month – not once a year. When drawing up your plan, list what you are saving towards and then ensure that every month, a contribution is made towards achieving that goal.

3. Schedule payments
If you know that you won’t get around to saving because you run out of money during the month, open a scheduled payment onto your investment account. Consider what you are savings towards and then allocate a certain amount to your investment every month. It’s a great way to save as you don’t need to worry about depositing money into your investment every month. Simply schedule the transfer to happen automatically.

4. The more you earn, the more you spend
It’s tempting to spend more as you earn more, but instead of using this money, consider saving a portion.

5. Be realistic
If you can’t afford to go on a trip this December, don’t. Instead of getting yourself into debt, rather save towards achieving your goals.

Different types of savings
According to Human, there are a variety of savings options available to consider for the whole year, whether you’d like immediate access to your money, access to just a portion, or perhaps no access at all with better interest rates. You need to find a product that suits your particular needs.

“Take a look at what you are saving towards. If your are trying to save for a holiday at the end of the year, you can consider fixing your money for a few months with a product that allows you to add money, such as a Flexi Fixed Deposit account from FNB. The longer your investment, the better your interest rates should be. However, you need to ensure that you won’t need access to those funds during the course of the investment, as you will incur unnecessary fees,” says Human.

“During the course of the year, you may experience some unexpected expenses, such as a tyre that bursts. For unexpected expenses, it is always a great idea to have access to your money in an account such as the FNB Money Market Investor. You need to ensure that if the unexpected happens during the year, you are able to address it.”

“When looking at savings products, consider whether you want to save on transactional product, or alternatively, if you are looking for a separate savings product. The benefits of having a separate savings product is that there are minimal fees and costs – with many accounts not having any fees or costs. You also receive a better interest rate,” concludes Human.