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The experiment opened his eyes to the real value of money – and hopefully diverted him from a life of debt onto a path of saving and investing. But unlike the One Rand Man, most South Africans will never make the decision to change financial direction and move away from debt and instant gratification to savings and wealth building.

This is according to a new ‘Life Surprises’ survey by Sanlam which found that most of us reach our later years with deep regret about how we’ve managed our money. The survey asked 600 South Africans over the age of 50 to write a letter of advice to their 20-year-old selves. The overwhelming majority (69%) advised themselves to save more and start earlier.

Jan Steenkamp, ‎Executive Head: Sanlam Segment Solutions, says the reasons for not saving have been well documented. “By and large South Africans have a consumption mindset. It is all about the ‘now’ and getting what we want immediately, even if this means falling into the debt trap. There is a lot of financial education on offer, but we are exposed to far more messages about spending and easy credit than we are about saving.”

Steenkamp says South Africans should consider putting themselves on a positive financial path early. “Starting to save young will ensure that your money grows exponentially through compound interest. This is the most effective way to build wealth over the long term. But it is also vital to remember that it is never too late. So if you haven’t started already, start saving today, whatever your age.”

Want to write yourself a highly congratulatory ‘dear 20-year-old me’ letter one day? Here are some tips.

  1. Draw up a budget based on your take-home earnings:

    “When people first start working they often over commit themselves from day one. They buy an expensive car and accept multiple credit card and store card offers. They plunge themselves head first into the debt trap, and often get stuck there for the rest of their lives. Drawing up a realistic budget and remember the golden rule of paying yourself first. Start by making saving one of your first ‘expenses’ and make it a first priority on your budget, not the last option.”

  2. Don’t overextend on a car – save the car payment cash instead:

    “One tip I’d give any youngsters starting out – drive a ‘skedonk’ for at least the first three years of your working life. Take the money you were so tempted to spend on a Golf GTI and save it so that you’ll be able to drive that fancy car later! You’ll get in the habit of saving early and you’ll start to get your money working for you from the outset,” said Steenkamp.

  3. Set up and maintain an emergency fund:

    This should be at least one month’s salary, but ideally between three and six months of your salary. Your fund can be used to cover things like replacing tyres on your skedonk, medical bills not covered by medical aid or a burst geyser and should be topped up as soon as it is depleted.

  4. Find a planner who will walk the long road with you:

    Nothing can replace tapping into the expertise of a professional financial planner who has formally studied every aspect of personal finance and been through rigourous exams. They understand what is needed in the short, medium and long-term. “Word-of-mouth is very often the best way to find a great planner, ask around and you are bound to find someone who has an amazing planner that is registered and backed by a reputable financial institution. Taking this small step, as early in your life as possible, can make all the difference to your financial picture and help you prioritise the most appropriate savings plan for each lifestage,” says Steenkamp.

  5. Step onto the property ladder as early as possible – but don’t put all your eggs in this basket:

    Paying rent helps someone else pay off their bond… So the sooner you can buy your own property the better. Save a deposit for your first home and aim to pay the property off as quickly as possible. Once you’ve got on top of your bond payments, you’ll have spare cash that can be in invested in other investment vehicles. This will allow you to get returns from a variety of sources, like the stock market, bonds or cash as well as property.

  6. Treat your older self well, save for retirement early:

    According to Sanlam’s BENCHMARK Survey, only around a third of South Africans (29%) will be able to maintain their lifestyle into retirement. “It may feel good to drive a Golf GTI in your 20s, but not so good to walk or take the bus in your 70s… So consult your financial advisor and start early, putting away as much as possible. Retirement products, like retirement annuities, pension funds and provident funds offer exceptional tax breaks and ensure you will have an income in retirement.”

BOX – Letters from over 50s to their younger selves

Survey respondents were asked to write a note to their 20-year-old self, and this is what a few had to say:

  • Dear me, please don't rush into marriage. Go to school, work hard and make something out of yourself.
  • Dear me, don't make debt. It will land you in big trouble. Invest your surplus money in property.
  • Hi me, start saving as early as possible. Don't follow your friends who tell you that you are still very young.
  • Dear me, live life to the fullest, never give up on your dreams. Never let people show you the wrong way. Be smart, think wisely.
  • Dear 20-year-old me, listen to the advice your parents give you. Save every penny that you have in case of an emergency. Look after your job and try to encourage your children to do the same.
  • Dear me, get a job, you have a child on the way. Stop partying and start a family. Buy a house and save more money.
  • Dear me, don't take life so seriously. Don't try to be perfect all the time and don't spend so recklessly.
  • Dear me, you are smart and sexy and a very good lover. You should never get married. Just work hard and have fun with female friends.
  • Invest in property. Buy your own home in your 30’s. Save a certain amount every month for unexpected expenses. Be financially comfortable when you marry and don’t rely on your husband for support. Don’t marry a gambler.
  • Life is too short, enjoy it while it lasts. Live your dreams, travel overseas and just be happy. Get a good education to fall back on. Don’t make debt.
  • Listen and learn from people with experience, Start a life cover with dreaded disease included. Start a savings plan with the first pay cheque.
  • Love yourself, take good care of yourself. Save for the future, taking advice wherever applicable. Always be prepared for all of life’s challenges.
  • Love doesn’t always last forever and divorce is devastating and costly. Protect yourself from unexpected costs and put money away for a rainy day.

BOX - summary of key findings

  • 78.5% of people claim to have had unexpected life events (good or bad) in either their own lives or that of a member of their family.
  • Just less than a third of the sample (28.2%) expect to outlive their partners.
  • Of those who expect to outlive their partner, the majority (35.0%) are uncertain about how many years longer they will live, but just over a fifth (21.4%) expect to outlive them by between five and 10 years and 29.7% say they expect to live for more than 10 years after their partner dies.
  • Over half expect to live well into their 80s but only 1.3% of believe they will live to be over 120.
  • Most expect to die of old age (46%) or illness (13.8%).
  • Half the sample (49.5%) reported a death in the family as being the event that has had the biggest emotional impact on them.
  • 97.2% of those that lost savings or pension savings rated this event as having a devastating or high financial impact, whereas 93.7 % of people that faced the closure of their own business rated the financial impact as being devastating or high. 89.2% of people that lost their income or were retrenched rated this as having a devastating or high financial impact.
  • People find themselves largely unprepared for the financial impact of these events.
  • 40.5% currently support a family member that they were not expecting to support. Grandchildren (44%), children (43.6%), extended family members (20.2%), parents (12.8%) and spouses (11.1%) are cited most as having to be unexpectedly supported.
  • Respondents have many financial regrets - 74.3% of the people surveyed would change something in their financial preparation and 82.3% wished that they had done more to be better financially prepared for life.
  • Things that they would change: to save more of their earnings (54%), start saving for retirement earlier (47.5%), provide for unexpected life events (43.7%), spend less (42.6%) and get advice from a financial planner (14.3%).
  • Over a third of the sample (31.7%) got their financial advice from a financial planner, but 28.5% did their own research and planning, and 23.2% got advice from their parents or no-one (21%).
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