Saving Vs Investing: How To Make Your Money Work For You


Most of us know inherently that saving for a holiday, that coveted luxury item or unexpected expense is a good practice. But how many of us actually save and how many understand the difference between saving and investing, and how best to make our money work for us? Here at National Debt Advisors, we are all about bringing you the latest saving tips and debt advice to ensure your financial well-being and a debt-free future.

So what is the difference between saving and investing? Saving is putting a portion of your salary away each month in regular deposits into a low or no-risk saving account (or stokvel) for a specific goal or unexpected expense. You will have a guaranteed return on your savings by earning a specific amount of interest each month, your original deposit will be safe, and you will have access to your money at all times. With little risk, the tradeoff is that your money isn’t working very hard and you are not earning high rewards. It’s a short-term strategy for funds you know you will need in the next 3 months to 5 years.

You would, for example, open an emergency savings account for medical emergencies or when your car breaks down, or have a savings account for home improvements or to buy the latest iMac. The sole purpose of a savings account is to have it readily available for a specific purpose, in a short time frame, without the need to go into credit or resort to reckless lending practices. Saving is vital to build up reserves and ensure a financially secure future. Every single South African earning an income should be putting something away each month (even if it’s only R100) if they want to be financially secure without the need for debt consolidation further down the line.

Investing, on the other hand, is a long-term wealth-building strategy where an individual puts money away each month (or in a one off payment) that is not needed for many years (20 years or more) and watching it grow. Your returns will not be guaranteed, you may lose part of your original deposit, and it involves greater risk but your money will work harder and the potential for profit and growth is far greater.

Investing is also pretty intimidating (unless you have the Midas touch like Warren Buffet) but equally important and should be the second step after saving. Consult a financial broker if you want to invest and generate extra income for your future. Examples of investments are a retirement fund to ensure you don’t have to reduce your living standard or face a traumatic debt review in your later years, or you could invest in stocks, unit trusts or property.

At National Debt Advisors, we can help you get out of debt if you are struggling to keep up with spiralling interest rates and consolidation loans or cannot afford to save every month. By speaking to one of our debt counselling expects we will be able to provide you with a tailor-made debt solution that meets your monthly financial obligations in one consolidated payment, protects your assets from credit providers, and gives you immediate cash flow relief to alleviate financial pressures and lead a lasting debt-free life.

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