Saving vs Investing

So let's start from the very beginning. What is the difference between saving and investing?

Saving is straightforward, and something that most of us do. Saving is essentially putting away an amount of money into a safe product or place, which can also be easily accessible. This could be into a savings account, or various other deposit accounts offered by a bank.

A safe product or place doesn't mean that it is physically safe to keep your money there (although it can be), but rather, that your money is preserved. What this means is that if you deposit R100 into a savings account, that R100 (called principal) will always be there, plus any interest on the amount. Interest is the 'reward' that the bank gives you for keeping your money with them.

Currently, South Africa does not have depositor insurance. This means that if a bank ever happened to fail (like African Bank did in 2014), there is no guarantee that people will get the money they deposited in their banks back. However, this should not be a worry, as the possibility of the large banks in South Africa failing is rare, so your money is pretty safe there.

Because of the low risk of this saving, the interest that you earn on the principal is generally very low as well. This is the basic rule of savings and investing: usually the lower the risk, the lower the reward.

Many people will then look to something else to help their money grow, and this is where investing comes in. Investing means that you put your money into riskier products, where you have the possibility of earning more returns, but also have the possibility of losing your principal. There is no guarantee that you will get any returns. Probably the most common form of investing is in shares -- you use your money to buy a 'share' of a company, say Woolies, and if the share does well, you can earn more money than you invested, but if it does poorly, you may lose more money than you invested. 

Why?

I’m starting this blog mostly out of sheer frustration that I can’t find an accessible source for investing in South Africa. The majority of blog posts are written from a US perspective, and I don’t know about you, but when I see so many dollar signs, numbers and converting to rand, I get more frustrated than when I start out.

If it’s not that, then it’s South African blog posts written in very complicated finance language, with a lot of information that could really be broken down more. At times even I find this difficult to follow, and while my profession is not in finance, I do have some background in it. So if it’s tough for me, I can just imagine how it is for those who don’t have much exposure to the finance world.

I’d again like to emphasise that I am not a professional in investments. Pretty much everything I know comes from my own studying and personal experience with investing in the country, as well as advice from more financial savvy friends and acquaintances. My profession is in the economics field. So please don’t expect miracles of riches from the information here.

More than anything, I just hope that the blog will be able to provide those of you who have interest in finances and investing a little more resources to help you along the way. I feel that there is a lot of emphasis on the need for saving and investing in South Africa by professionals, but there really isn’t a lot of accessible information out there for the ordinary young person. I hope that talk of finance and the economy is not just limited to a certain set of the population, and that everyone can feel comfortable having an opinion on the topic. 

And so, even if one day you choose to have someone else manage your wealth, at least you will have some sort of idea of what they are doing to your money! I hope especially that students will come across this blog, and start to really think about their financial wellbeing, and to have a little bit more control over it, especially from a young age.

Finally, I hope you will have a little patience with me. Hopefully as this website develops, I can have a better understanding of the type of information that is really required out there, and that I can endeavour to collect and distribute information to you that is relevant, correct and easy to follow.