How to start investing with R10

Last updated on 13th March, 2024 at 06:11 pm

Saving alone can be tough in these troubling economic times, never mind investing long-term. But it’s possible…

Reading time: 3 minutes

In this article, you’ll learn:

• What’s a better option investing and saving?
• How to conquer your fears and make your money work for you
• When to start and how to navigate debt

What’s a better option investing and saving?

Whether investing is a better option than saving depends on one’s own needs and goals. According to personal finance enthusiast Miranda Zulu, each is as important as the other: “It’s important to understand the difference. With savings, one usually looks at short-term, low-risk, and low returns. You’re not really trying to make money from this and might be looking for a place to keep it.”

Examples of this include saving for once-off events such as vacations, home renovations, or even weddings. “With investments, on the other hand, your money will work for itself.”

Zulu suggests considering a tax-free savings account (TFSA) for short-term savings and exchange-traded funds (ETF) for longer-term investing. “A TFSA is great because you get rewarded for contributing. All returns and capital gains are tax-free”, says Zulu. In South Africa, the TFSA limit is R36 000 yearly and R500 000 for a lifetime.

ETFs can be compared to bundled or basket shares, where one can access shares of similar companies that are listed on the JSE and have historically performed well, such as Sanlam’s Satrix Balanced Index Fund*. “ETFs are great for beginners. I like to use the example of a makeup bag, where you have all these different products that are related. It eliminates worrying about picking an individual share.”

How to conquer your fears and make your money work for you

Starting the process of stashing money away awakens fear in most of us, whether it’s losing money or not selecting the best choice. Zulu’s own money journey started with fear, but it also started small with just R10 and a share in a company she recognised.

“Start with an amount you’re comfortable losing”, she advises. “If you don’t want to risk too much, don’t invest in something volatile like cryptocurrency. Focus on options that have a proven track record, and don’t panic when the unexpected happens as you could risk selling your shares for next to nothing.”

When to start and how to navigate debt

“The best time to invest is yesterday, and the second-best time to start is now”, says Zulu, but the shackles of debt lead us to believe that we must clear it all before stashing some funds away. When you’re caught between a rock and a hard place, Zulu suggests a simple method: “Do it simultaneously. If you only have R500, put R300 towards debt and R200 towards your savings. Don’t overthink it.”

If you have 1 000 steps ahead of you, you might not take the first one, so simplifying the process will make it easier to stay motivated and excited about your finances.

*Sanlam Life is a licensed life insurer, financial services provider, and registered credit provider (NCRCP43).