Whether you are in your 20s, 30s, 40s, or even your 50s, you are always learning about new things.
This can also be applied to your finances and the manner in which you manage your money.
The financial needs of a person in their 20s are completely different from the financial needs of a person in their 50s. Therefore, people should take steps to take care of their financial future.
Here are some money tips for your 20s, 30s, 40s, and 50s:
Your 20s
Learn the value of compound interest
According to Mariska Oosthuizen, chief marketing officer at Sanlam, the sooner people start to invest, the more time they have to take advantage of compound interest.
Compound interest is the interest you earn on your savings, so the sooner you start saving, the more interest you will earn.
People in their twenties may also feel like they don’t have enough to put away during the early stages of their career, but they should not underestimate the value of saving small amounts, which have benefits beyond compound interest.
Start thinking about risk
When you are in your twenties, you may feel like you’re too young and healthy to prioritise life-event risk insurance such as income protection and life insurance, but it is important to have this on your radar.
Oosthuizen said that as we age, we are more inclined to develop health conditions, which means higher insurance premiums.
“You’ll typically pay less for life insurance if you take out a policy in your twenties than if you wait until you’re middle-aged, which means that if you start now, you’ll receive the same cover at a much lower cost later in life,” Oosthuizen said.
Build your credit score
According to Oosthuizen, not having a good credit score can count against you.
Your twenties are a good time to learn the difference between good debt and bad debt, so you can start building a good credit score instead of taking on a lot of debt and credit beyond what you can afford, which will have a bad impact on your credit score.
Remember that a good credit score is built on good financial behaviour.
Your 30s
Get serious with a financial adviser
Your relationship with your financial adviser is one of the most important in your life, so when you are looking for the best expert for your needs, you should:
– check their qualifications
– ensure you can connect with him or her
– be sure that they understand your financial goals
Getting the help of a trusted financial adviser will help you stay on track and meet your goals sooner.
Recommit to your future
Your 30s are a good time to commit or recommit to your future by taking stock of your financial goals and making all the right moves to invest and save for them. You can start by reviewing your financial plans and seeing if they still align with your current goals.
You may also want to reassess your financial situation, as a lot can change from life stage to life stage.
You can start putting a little bit of money aside each month, making sure that you stay committed to saving. Then, slowly increase your savings and investment contributions as you earn more.
Your 40s
Be prepared to join the ‘sandwich’ generation
South Africans are among the worst savers in the world, and so the ‘sandwich generation’ is now paying the price.
The term sandwich generation refers to the group of people sandwiched between needing to care for their children and needing to take on the financial care of their older relatives. This usually happens when people are in their 40s and 50s.
People in their 40s need to take care of their finances, which means resisting the temptation to dip into their savings to support older relatives, she states.
Stay focused on building a financially confident future
Your 40s can be a financially demanding life stage, as your budget is stretched due to increases in the cost of living, as well as taking care of your children’s education and paying off your bond.
However, Oosthuizen says you should resist any urge to cash in on your retirement savings prematurely to take care of these expenses.
In your 40s, you have around 20 years until retirement, so use this time wisely to continue building up your nest egg.
Get your affairs in order
Your 40s are a perfect time to ensure that your affairs are in order, says Kirsten Smit, an advisory partner at Citadel Wealth Management. After all, you probably have dependants such as spouses, children, and parents.
It is, therefore, essential that:
– your will is up-to-date and in line with your long-term estate planning strategy
– your beneficiary nominations on your policies and retirement products are accurate
– you have sufficient risk cover in place should something happen to you, like death or a disability.
Your 50s
John Manyike, head of Financial Education, Old Mutual, shares his money tips for people in their 50s:
– Ensure that retirement planning is a priority
– Having a valid will in place/estate planning to ensure that there is enough liquidity in the estate to cover any taxes, capital gains tax costs
– Focus on paying off debt so you are debt-free when you retire
– It’s never too late to save; if your retirement age is 65, there are 15 years to accumulate as much as possible
– Be selfish with your money; don’t spend too much on children and family members.
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