Building wealth: There’s more to it than just a savings account – On the Money with Jarryd Neves

Jarryd Neves
On the Money. Budding stock market investor Jarryd Neves, of BizNews, sends out an invitation to everyone who wants to ask questions about share investing – but is too embarrassed to ask. Write to [email protected] And tune in for his regular Monday column: On the Money

Last week, I wrote about the importance of teaching kids the value of money. Naturally, it got me thinking about my financial journey and how I started saving. Like most kids, I had a piggy bank stuffed full of bronze coins. When it came time to count it, I was bitterly disappointed.

All that time, all that patience – and for what? A measly pittance. Perhaps this example can be used to illustrate wealth building as an adult. Aside from other important factors (which I’ll cover in a moment), many people my age think that as long as they have a savings account, they’ll be fine. Well on their way to a comfortable life and cushy retirement.

Well, I’m afraid not. You see, while a conventional savings account is a good start, it’s certainly not where you should stop. But before we see what other wealth creating tools are out there, let’s go back to basics.

Firstly, once you’ve been blessed with a steady pay check, it’s important that you stick to a budget. Living beneath your means is one common trait many millionaire’s share. Spending less than what you earn may seem like a rather obvious thing to remember, but you’ll be surprised at just how many people aren’t able to do that. Some out of necessity, others to simply have the latest clothes and gadgets. Educate yourself about money, debt and budgeting.

Step two would be to build an emergency fund and discipling yourself into saving every month (if possible). The emergency fund will cover you should anything happen and the constant saving will develop into a habit. Paying yourself first is the best thing you can do for your future financial security.

Right, basics out of the way, let’s look at ways to increase your wealth. There’s certainly nothing wrong with having a savings account. But there are far better ways to grow your money. As intimidating as it is, share investing is a proven way to grow your finances. Of course, it’s not a sure thing – plenty of research, planning and reading needs to be done before investing your money in any company or ETF. I’ve written about EasyEquities before – it’s a brilliant platform that allows first-time investors to learn, experiment and explore the stock market. What’s more, you invest as much as you can afford or are comfortable with.

If you’re not comfortable handling the finances yourself, no matter. There are myriad financial advisors out there who are willing to help you. Finding the right person to assist you may take time, but will prove beneficial. Personally, I dabble on EasyEquities as a fun way to learn about the stock market, but leave my ‘real’ finances to a professional whom I’ve known for many years and trust.

If you’re still unsure about investing in companies and the stock market but still want your money to work for you, consider a tax-free savings account (TFSA). Earlier in the year, Candice Paine of PR Financial Services described tax-free saving as “the only free lunch” in the investment world. How does it work? Well, you can contribute up to R36,000 each year with a lifetime limit of R500 000. This needs to be viewed as a long-term investment. As the years go by, that money will grow. The bonus is that when it comes time to withdraw the money, all the returns are tax-free. Just remember, that once you’ve taken it out, you can’t put it back.

Aside from the aforementioned ways to grow your wealth, there are numerous options out there, like alternative investing. It all comes down to what you feel most comfortable with. Just make sure you know what you’re doing and have informed yourself of all the risks – this is your money you’re dealing with, afterall.

Last week, I asked you to send me your finance and investment queries. Here, Rocco van Zyl* of Brenthurst Wealth Management shares expert advice by providing answers to your questions.

Patrick asked,

I have recently started investing in shares with EasyEquities. I do not know which shares I should be investing in? Do you have any advice on what I should be doing? Or where I can get info on shares to buy or sell?

Rocco replies,

EasyEquities is a great platform to use, for somebody who would like to manage their own personal share portfolio. Navigating through the platform is relatively simple, and convenient for someone who likes to keep track of their portfolio. There are other platforms I would also recommend, such as Sharenet’s Online Trading Platform.

One always needs to do your own research when it comes to deciding on which shares to invest in. Not all sectors are created equal, and I would suggest starting by looking at shares that are in sectors that show growth potential. You also need to have a long-term plan and stick to your strategy, as investing in shares can tend to be volatile. Generally investing in individual shares can potentially entail a lot of risk, and potential for a huge drawdown (such as Covid-19 and the value of airline shares). If this is the start of your investment journey you could also consider rather investing in ETF’s or unit trusts – which are baskets of shares – as they tend to be more diversified, making them less risky and less volatile over time. If you are serious about building a diversified portfolio also consider consulting with an accredited, qualified financial advisor.

When looking for info on which shares to buy and sell, one always needs to stay well-read. Try get access to as many news-sources as possible.

Have a question about share investing? Write to me at [email protected].

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