An investment of R10 000 can yield a return of R142-million over 40 years – a return that sounds unbelievable, but is achievable if young people adopt investing principles from university.
If today’s students learn the skill of investing and avoid unnecessary spending financial freedom will be a real possibility in the future, according to a bond agency trader at Regimens Capital, Mbuyi Dlamini.
“Investing can be described as using your money to buy something that you believe will earn you more money over time,” according to the investment firm Allan Gray. “Depending on what you invest in and how much you choose to invest, you may make a profit. What you earn is known as the return on investment.”
There are many competing demands for your money and often not enough money to save. Dlamini says students need to understand that having extra money creates a “safety cushion”. It reduces the extent of instant gratification – the things you want, rather than need – by identifying financial priorities. This philosophy creates a culture of efficient money management and living within your means.
Unit trusts as a starting investment vehicle
Dlamini advises that students look towards full “discretionary investments”, which means the student decides on how much and what to invest their money in. He emphasises that, considering the scale of student finances, they should be looking at unit trusts when beginning their investment journey.
“Unit trusts are easily accessible and affordable investments that give you access to a variety of funds to invest in and are flexible because you can access your money whenever the need arises.”
You can start a unit trust with a monthly debit order of R500, which is the minimum you can start investing with.
Investing requires patience and, the longer the investment horizon, the greater the returns. Ten years is the minimum time for a healthy investment, says Dlamini. A potential investor should always bear in mind the “risk versus return decision” and should never invest more than they can afford to lose.
Saving is difficult for students
For many Witsies, their main anxiety about saving lies in not having enough money initially. This makes it hard to begin thinking about investments and trying to survive the month at the same time. Raeesa Dawood, 4th year MBBCh, says: “I get a set allowance, so there’s not much to save … I am not bothered by not saving.”
Mpilo Shabangu,1st year BA, says: “I don’t save because I haven’t been exposed to the knowledge and culture of saving … Black culture did not teach us the importance of putting coins in a piggy bank. I knew my parents’ payday because that is when I would see them splurge and so I have also adopted that culture of spending.”
Dlamini says his personal philosophy is that it is better to “save now, spend later” and students must try to avoid credit as much as possible.