Tell anyone under 25 they need to save money, and check the reaction you get. But there are some things that really are worth saving for.
Until you’re fending for yourself, it’s difficult to get the concept of saving. Till you get your first job, many young people (but definitely not all) have parents, guardians or other family members as an emergency financial fund.
But saving money is actually the cool thing to do – from the time you get your first pay cheque.
Here are some of the great things that savings can buy you when you are young (and also when you are older):
1. Independence: Asking someone for money is not a pleasant experience – you have to explain why you need it, why you don’t have the cash yourself, and when and how you will be paying the money back. It places a strain on relationships.
Sure, everyone has a crisis at some time in their life, and this is not always avoidable (my first job took three months to get me on the right pay scale), but believe me, if you can avoid this situation, do. Even a small emergency fund can give you a reasonable amount of independence. Make it a priority.
2. Medical care: OK, we’re not talking major operations here, but if you don’t have a medical scheme, and you get really bad flu, you can go and see the GP and pay for medicines at the pharmacy to make you feel better.
While we’re on the topic, try and get some medical cover for yourself. A hospital plan is enough. It’s something that can save you thousands in the long run.
3. Transport: It could mean paying your own taxi fare, or putting down a deposit on a second hand car. Freedom of movement is a freedom like no other. You can go where you want to when you want to – the decision is yours.
Even cars that are not fancy, new or expensive buy you the same freedom as new ones do. Have the money ready for the deposit when the right car comes along.
4. Appliances: A decent stove, washing machine or TV can make a big difference to your life. But save up the money first, and then buy them cash. Hire-purchase is expensive – you could end up paying almost double for the appliance over time.
Also check out Gumtree and OLX for excellent second-hand bargains. But for that you need cash. Get it together. And don’t spend it on other stuff you don’t really need.
5. Clothes: Your type of clothes. If you have the cash, you get to buy what you like. By all means buy one or two labels, but for the rest, go easy. You don’t want to spend all your cash on clothing. There are other great things you can do with the money.
Don’t do clothing accounts – they encourage you to spend money you don’t have, and on which you will be paying high interest rates for months or years. Many debt problems begin with clothing accounts that get out of control.
Also, if you have savings, you can buy clothing bargains anywhere, not just at the shops where you have accounts.
6. Your own place: Whether you are renting or buying, nothing says you’re an adult now quite like having your own place. But if you’re renting, you will need the first month’s rent, plus a double deposit, which can add up to a lot of money.
If you’re buying, you will need 10% of the purchase price, which could be many tens of thousands. It’s never too early to start putting money away for that. It also means you never have to stay in a place where you are unhappy or badly treated. Having no cash of your own can trap you in a horrible situation.
7. Communication: A cellphone, a tablet, a laptop – even a landline. All these things put you in touch with the people in your life, but they all cost money to buy and to keep going. It’s a nice feeling being able to do this for yourself.
8. An emergency fund: Cars break, water pipes burst, you need to get to a family funeral, or you drop your phone in a puddle of water. Emergencies come in all shapes and sizes and that’s just the thing – we never know when they are coming and what their nature will be. But if you have an emergency fund, you can take care of most of these things yourself, and you don’t have to ask someone else, or the bank for the money.
You also don’t have to pay sky high interest rates on your credit card.
9. No stressing about cash: Living on the edge and living from pay cheque to pay cheque mean that you are permanently stressed out, worrying about finances and debts. If there’s no give in your budget, even a small unexpected expense, such as having to buy clothes for a social occasion, can put you under pressure.
The peace of mind even a small emergency fund gives you is so much greater than the joy you get from anything you spent the money on.
10. Freedom of decision: If you have the cash to foot your own bills, you can ask other people their opinions on certain issues, but you are under no obligation to follow their advice. You can make your own decisions, choose what you think is best for you, and be answerable only to yourself.