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Saving for it often takes a back seat to more immediate ‘needs’ like investing in the current you: purchasing a home or car, building a family, your social life and that upcoming overseas holiday. This doesn’t have to be the case. You can find a balance between preparing for the future while living your best life today.
While trying to find a balance between living today and saving for the future, millennials are reinventing the idea of long-term saving altogether. According to Ntombi Tisani, Head of Marketing at Old Mutual Personal Finance, a new Bank of America study found that millennials are the first generation to plan long-term for financial freedom, which is the ability to live their desired lifestyle, instead of exiting the workforce. The report reveals that 63% of millennials are saving to live their desired lifestyle compared to 45% of both baby boomers and Gen Xers, whose focus is on saving for retirement. The report also reveals that young people are redefining life’s milestones and have a different view of their later years which may change the traditional retirement model.
Tisani says that this trend is relevant for South Africans too. “While we are seeing shifts in the savings culture of young South Africans and young people integrating their careers into their lifestyle, it does not mean they should ignore the natural easing of ones working life which happens around age 65. The 2016 Old Mutual Savings and Investment Monitor revealed that a majority of young people have not yet started saving for their eventual easing from work later in life, with only 38% of youth contributing to a formal retirement structure.”
Traditionally, if you want to retire by age 65 experts agree that you should aim to save enough to ensure that the pension you eventually receive is around 70% of what your salary will be when you retire. Achieving this target typically requires that you invest at least 15% of your monthly income into your retirement savings, for the full duration of your working life, from the age of 25. So, in a tough economic environment with rising interest rates and living expenses, how do you find the middle ground between investing in the future you and still living your best life today?
“Advice and planning is essential, and having a budget is the best way to do this,” explains Tisani. “It helps you to keep track of where you are with your finances each month, how much you are spending versus how much you earn.
“It’s also never too early to get in touch with a financial adviser. As we say in our business, today is the day to get great advice,” she adds. “You don’t have to be wealthy to do so. A financial adviser can help you build a plan and stay on track for both short term goals, like travel or new car, and long term goals like retiring at a certain stage or with a certain income.”
The Old Mutual research highlights that although young people are not necessarily contributing towards traditional retirement vehicles, they are becoming more financially aware with an increase in informal savings among -young people. “We are seeing millennials make small changes to their daily spending habits that don’t hamper their lifestyles too substantially,” says Tisani. These behavioural shifts have resulted in a cutting back on luxuries like holidays, shoes and clothing and alcoholic beverages.
“Making small, incremental changes to your daily financial habits limits the impact on your lifestyle,” she says. Tisani offers the following tips to help young people develop a positive savings culture:
Tisani believes that a healthy mix of saving, financial savviness and expert advice is the best way to ensure that investing in the future you, doesn’t mean giving up your lifestyle completely. “Asking the right questions and receiving the right advice will allow millennials to find a healthy balance between investing in their future self and living their best life – now and later on in life.”