1) Build a budget

A money plan, or budget, sets out how much money you have and what you plan to spend it on. It’s the best way to make sure you spend your money wisely, and have enough when you need it. Here’s how to get started:

• List and add up your monthly income – include any money from an allowance, bursary, job, etc. If you get any of your income in a lump sum (like a bi-annual bursary payout), divide the lump sum by the number of months you will need it to last for, then add that monthly amount to your monthly income.
• List your expenses – both regular monthly expenses (such as transport, data and airtime, food, toiletries, entertainment, etc.) and irregular expenses (such as textbooks, clothes, hair appointments or perhaps a trip home). If you’re not yet sure what will be a realistic amount to spend on a category, put down your best guess and then adjust your budget as needed based on your actual spending. Include any family support contribution you make as an expense in your budget, and plan for it accordingly.
  For irregular expenses like textbooks, work out how much you need to save each month. Include this as a saving in your budget, and set this money aside each month to make sure you have enough money to buy them when you need them.
• Track your spending – No matter how small, each expense adds up. Keep tabs on your spending by using your banking app, bank statements and receipts. Review how much you spend regularly to see if you’re on track for the month. At the end of the month, compare your planned spending to your actual spending (you can do this in the ‘actual’ column on the budget planner on page 20). If you find you consistently overspend in one category, you may need to adjust your budget.

4) Build good spending habits

Be smart about how you spend your money. Get into the habit of checking and comparing the prices for items and services at shops and online – and not only for big purchases; it’s also worth doing for small items that you buy regularly. Consider buying items second-hand: you’ll often snag a good deal at a great price.

5) Reduce bank fees

Bank on digital channels. Use your bank’s app, internet or phone banking platforms to reduce your fees (cash withdrawals and in-branch transactions are more expensive).

Where possible, don’t use cash to pay for purchases. Rather use your card, as drawing cash can be expensive.

When you do draw cash, remember that cashback at till points will cost you less.

6) Saving

Saving is a critical habit to learn if you want to build wealth. Even if you start small, build this into your budget now. Read “Compound interest – the money superpower” below to see why.

7) Avoid unnecessary debt

If you have some form of regular income, whether from a job or a bursary, you may be eligible for credit such as a store account. Be very careful of taking this up. When you buy something using credit, you are borrowing money to buy something before you actually have the money for it. Over the next months and possibly years, you will have to repay the money you borrowed, plus extra money (called interest) and monthly fees. This means that anything you buy using credit will cost you more than the price of the item, and you will have less money for many months in the future while you are repaying your debt. Budget and save towards items you need and want, and avoid the expense and monthly pressure of repaying debt. If you do take up credit, plan for it carefully in your budget and stick to your repayments each month.

Money terms

There are a lot of technical terms that we use when we talk about money. Don’t let it intimidate you: it’s really not all that complicated. Here are explanations for some common terms:

South African Reserve Bank (SARB)

The SARB is the central bank of South Africa. Its primary purpose is to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa. The SARB has a committee that considers when to increase or decrease interest rates, depending on the economy. It lends money to commercial banks (commercial banks are the banks we as consumers use), but not to the general public (that’s us consumers).

Repo rate

The repo rate is the interest rate commercial banks pay to borrow money from the SARB.

Inflation

Inflation is the rate at which the general price of goods and services rises in an economy over time. Inflation decreases the purchasing power of your money, meaning that you will be able to buy less with R20 a year from now than you can today. Ask your parents how much a loaf of bread or a packet of chips cost when they were kids, and you’ll have a clear example of what inflation does to prices.