Financial advisers are urging young people entering the labour market for the first time to start saving at least 20% on their pay cheque.
Young people are also encouraged to accumulate assets that appreciate in value early and avoid a flashy lifestyle and succumbing to family and peer pressure.
Inter-generational debt trap is common in South Africa and experts say financial decisions taken when someone enters the labour market determines one’s financial journey during their lifetime.
Many young people fall victim to same trap that took away their parents’ “financial freedom”.
Experts say that many young people are struggling with managing their finances because they are not taught early.
Some end up highly indebted for the rest of their lives. Expensive cars and rentals of expensive apartments lure many young people into a life of over-indebtedness and to choose investments that give returns that are higher than the inflation rate.
“We are recommending that young people get the basics right from day 1 in terms of the percentage they spend on a car and home loan so that they never end up in a situation they are caught up in circle of debt,” says CEO at Savings Institute, Gerald Mwandiambira.
Many young people are bombarded with offers of credit from various retailers and financial institutions. Mwandiambira has some tips for them, on how to manage their finances.
“The first one is that you are an individual, do not look at your friends and your parents as an example and you are never too young to start saving for retirement.”
Tax free savings can help improve savings rate:
It is also recommended that parents start buying a retirement annuity for their children as soon as they are born.
Source: SABC News (sabcnews.com)