How good savings habits now will pay in the future

Now that you have started working, this is the perfect time to put a plan in place for your savings journey.

Savings are important as they give you freedom, the ability to work towards bigger purchases, cushion the cost of big bills and provide you with the security of knowing no matter what happens, you will always have money to fall back on.

Here are some quick tips to get you started that quickly lead to some financial freedom, choice and a sense of control.

Bucketing or having separate accounts

When you earn your income, how do you decide what to do with that income? Do you tend to spend more than you earn? Paycheck to paycheck? Or save some each pay?

Depending on what you choose to do with your income now could determine the kind of behaviours you will continue into adulthood.

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The bucketing method is one way to gain greater control over your spending. 

The idea is to set up your buckets as separate bank accounts for money to spend on groceries, transport and fun, money you need for your bills and money you save.

By having separate bank accounts, you will know how much money you have in each bucket before choosing what to do with it. 

Setting up an automatic transfer each pay, removes the temptation to spend more as the money has already been allocated. 

Make sure you overestimate the cost of your bills and this will ensure you will always have enough money in there to pay them.  

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Shop around for your bank accounts

Now that you have worked out your bucketing amounts, you need to set up your bank accounts. Shop around online and look out for accounts with high interest, no fees and flexibility of transfer with online banking. 

Your spending accounts are the only accounts that should be linked to your card. 

By getting a Mastercard or Visa debit card, you have the flexibility to use it as a credit card but your using your own funds and not going into debt.

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Look for a higher interest account for your bills and savings accounts. As this money will be sitting idle, you have the opportunity to earn interest and essentially receive free money from the bank. 

With hundreds of account options available, ensure you choose an account with no annual fee, no account keeping fees or withdrawal fees. 

If you are being charged for having an account, choose another account.

Compounding interest

Now that you have your accounts set up, ensure that your savings and bills accounts are deposited into a high interest account. 

Albert Einstein reportedly said: “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it.”

And this is because compound interest can create a positive snowball effect on your savings and a negative snowball effect if you are in debt.

When people think of interest, they often think of debt. But interest can work in your favour when you are earning it on money you have saved. 

With compound interest in a savings account, your interest will be calculated on the collected interest over time as well as on your original deposit, interest on interest.

The longer you leave it in there, the better chance it has to grow and start to create your wealth.

Remember, creating positive money habits early will benefit you for a lifetime. 

Every decision we make has a trade-off. Starting your savings early puts you ahead and enables you to have control of your money and provides you with choices.


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The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.