Secure your future by creating good financial habits when you're young

Young professionals are among the most educated in our society and hold important positions in various sectors of our economy. They are at the heart of keeping the engine of our economy running.

A major gap in the education system, however, is teaching these young people how to manage their finances.

Promoting financial literacy is particularly crucial in a country such as SA, which is still trying to move beyond the impact of the inequality and injustices of a past that made it more difficult for some groups to move up the socioeconomic ladder.

To help bridge this knowledge gap, Nedbank Private Clients recently hosted a digital event focused on advising young professionals how to navigate their finances. Speakers on the panel were Thapelo Tsiu, the senior manager for financial wellness and implementation at Nedbank, and Khanya Modipe, founder of Slay with Kay Fitness and a qualified chartered accountant.

Because 90% of South Africans are not prepared for retirement, Modipa spoke about the importance of thinking about the future and promoting a savings culture among young people. 

It begins with establishing good financial habits such as setting goals and managing expenses, said Modipa. Young professionals should save more at the beginning of their careers, while their earning potential is still high.

As they join the middle class and keep improving their earnings, they will be presented with many opportunities and offers to take on debt. They could even be enticed to buy luxury goods they don’t need. Modipa encouraged young professional to instead speak to their brokers and financial advisers about different types of investments.

As they try to build a solid financial foundation for themselves, young professionals are often expected to support family members financiallybecause of their access to resources. This is what is known as “black tax”.

Constraints in the economy, with increased risks of losing jobs, are also another factor that require young professionals to be aware of and more conscientious about their financial position. 

“The great thing about creating good habits is that if you have it automated, then you never have to think about it ever again,” said Modipa.

“And I think that there are so many obstacles in front of us, where we feel like we have to live up to our professions. You finally become a CA so you feel like you have to get the German car, you have to get the really nice house, and then you forget that one day you might not necessarily have all that money.”

Modipa said young professionals should also take advantage of the pension and provident schemes provided by their employers and to have their own personal retirement annuities to augment those savings.

Young professionals do not have to walk this journey alone.

At Nedbank, relationship bankers play the role of directing clients to resources and expertise to assist them to improve their financial positions, said Tsiu.

“We have skilled financial planners, and it’s just a matter of how much you are willing to disclose to them, how much you are willing to say, ‘I have got no clue about my financial situation’,” says Tsiu. 

There are several things that young professionals need to focus on to improve their financial literacy. 

One is understanding how tax affects their savings and investments. Another is doing their research to understand the investment instruments they are putting their money into. A third is ensuring they invest without emotion by automating their monthly investment deductions. 

Ultimately, the message to young professionals is to educate themselves, prepare adequately for emergencies and retirement by saving, and to seek advice from qualified experts.

To find out more, visit Nedbank Private Clients.

This article was sponsored by Nedbank