Bank Better, Live Better

This one decision can give you a carefree retirement

Your future happiness is dependent on the decisions you make as a young adult. Here’s one decision you really need to make that your future self will thank you for.

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Imagine you’re in your late 60s: You’ve just received a standing ovation for your great teamwork, clinked a last ‘cheers’ with your colleagues, packed your desk and removed your work email from your cellphone. You’re ready to ease yourself into a comfortable retirement where you get to spend your time exactly how you like it. At this point, the difference between a good and bad retirement depends on one decision you make now: to start saving.

 

Thinking ahead

According to the 2019 10X Retirement Reality Report, more than two-thirds of economically active South Africans earning in excess of R7 600 per month indicated they had no savings plan in place for their retirement. Without a plan, the chances you’ll be able to sit back and enjoy your later years start getting slimmer.

That is, unless you make a very important decision: to start saving for your retirement right now. If you prioritise putting money towards a savings plan for your retirement over other expenses, you’re less likely to work beyond your retirement age to afford the lifestyle you’ve gotten used to.

 

The magic of time

By thinking about your retirement now as opposed to in a month, or a year, or 10 years, you capitalise on the element of time. With time comes a brilliant moneymaking concept: compound interest. Compound interest is what you get when you earn interest not only on the initial amount you invested, but also on the accumulated interest. The longer the investment period, the greater the amount of compound interest. 

Did you know that someone who starts saving towards R1 million for their retirement in their 20s only has to save for half the time that someone who starts in their 30s does before compound interest does the rest? Read more about the power of compound interest here.

Want to see this in action? Try Capitec’s handy savings calculator, and work out how much your money would grow in 6, 12, or 24 months.

 

Simplify retirement

The trick with compound interest is that the longer it works, the more you earn. It’s simple, really. Your retirement savings can work hard for you; all you need to do is to start sooner rather than later.

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