Taking initiative to save and pay off debt is not straightforward. But which do you do first? Both are vital to the stability of one’s personal finances. Doing both in varying degrees may be a gamble worth taking.
One of the biggest myths that society buys into is the myth that saving up is more important than paying off debts. Living in nation that boasts extremely low figures of savers and immensely high figures of indebted consumers, South Africans are in need of some intervention. Money Savvy Kids (MSK) is here to give them the jolt needed when it comes to finances.
One thing no one has told you is that the cost of debt is usually much higher than the benefit gained from saving. This isn’t to say that you should not at least have an emergency savings fund. This fund should contain about three to six month’s worth of living expenses so you can be prepared when disaster strikes. Resolving to pay the minimum payment may also have to be a thing of the past as well. Reducing your debt by paying more than is required will ultimately translate to your pocket getting back its jingle a lot quicker than it would if you were to save all your money. In effect, prioritising paying off your debt is the first crucial step you need to take in order to be able to effectively save in the future.
Identifying which of your debt is costing you the most is just as critical. Whether the debt in question is R1000 or R10 000, the differentiating factor here is the amount of interest charged on a monthly basis. The debt charging the most interest should be paid off as quickly as possible. By making the conscious decision to pay off your most expensive debts first, you will be at a bigger advantage when you do start saving for retirement.
While the majority of people do not ever rise to a point of complete financial freedom in their lifetime, some manage to break the mould. This can only be done by harnessing financial intelligence. Financial literacy is the cornerstone to financial prosperity. It builds confidence and knowledge in the lives of individuals and the country as a whole.
MSK is a financial literacy program for children as young as seven. The programme is rolling out its in-school curriculum in March 2017. Not only does MSK effectively instil in them the skills and foresight to correctly manage their finances, it also equips them with entrepreneurial skills. Equip your child today so they can enjoy a money savvy life tomorrow.