Two Bits – 22 January 2016

My parents grew up between the world wars, so had lived through the Great Depression, the Second World War and the very hard years after that. So they knew the value of a penny and made it stretch as far as possible.
The rule they taught us was “Nothing for nothing”. For example, when I was about six I desperately wanted a bicycle, a proper 26 inch with a three-speed gear. Cutting edge, back then. An older boy in our road agreed to sell me his for the princely sum of £21, or 21 guineas as they were known. Problem was, I didn’t remotely have that kind of money, which today translates to R500 or more.
My parents agreed to match my savings one for one. If I saved £10 and 10 shillings, they would put in the balance. I whined a bit about that, but they were adamant: no saving, no bicycle.
And so began a very long slog. There were 12 pence to the shilling and 20 shillings to the pound sterling and let me tell you, a shilling was a princely sum to a six year old back in the 50s. I could rely on uncles and aunts to slip me maybe 10 shillings on birthdays and at Christmas. Then I could do household chores, like cutting the lawn, for a shilling a time. And we had beeg, beeg lawns! Other chores like collecting the hen’s eggs once a day earned a few pennies a week. There were lots of other chores.
It took me two years of concentrated saving but I made it. I am very grateful to my parents for that lesson, because it taught me the value of money and of saving. I can’t say I saved all my life, mainly because for a long time as a young reporter I didn’t have much to save. But when we had a child and I realised that I would have to save for her education, the message hit home.
Starting off the new year, promise yourself that 2016 will be the year you learn to save for the important things in life. The secret to saving is not to save what is left over at the end of the month. The secret is to save first, then spend through the month what is left over!
It doesn’t really matter how much you save, the point is to get the process started and develop the habit. First step is to sign up for something like a unit trust account. You don’t have to put in a fixed amount every month, just what you can afford.
Sit down and draw up a list of that you spend your money on. Then examine each item carefully. Do you really need coffee every day? Do you need that DSTV subscription? Can you afford to go to the pub? Couldn’t you make pet food at home, rather than buying expensive bags of processed food? Do you really need to spend as much on clothes as you do?
If you’re honest with yourself, you’ll pick up the items you can easily save on. For example, I saw some factory workers the other day, buying bottles of water at R10 a pop. That’s just insanity. You simply do not need to drink bottled water anywhere on the North Coast, if you have access to municipal water.
I would say that everyone is capable of saving at least 10 percent of their earnings. Put the money into that unit trust and forget about it. Before long you will start to see the value of compound interest. If you’re saving money with compound interest, it’s a wonderful thing. But if you take a loan with compound interest, it’s hell on earth because you will find it very difficult to pay off the interest fast enough. Scientist Albert Einstein described compound interest as the eighth wonder of the world. “He who understands it, earns it. He who doesn’t, pays it.”
Here’s a few examples. If you saved R50 a month at conservative 5% interest, after 10 years you would have saved R7 700, and after 20 years a grand R20 500.
But unit trust funds have been performing at 10% or more over longer periods, and even at 10% interest, R100 a month would grow to R20 500 after 10 years and R76 000 after 20!
If you do nothing else in 2016, do this one thing for yourself. Ask your bank to set up a unit trust account. It’s easier than you think!
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Do you know why women aren’t allowed in space? To avoid scenarios like: “Houston, we have a problem!”
“What is the problem?”
“Yeah, great, pretend like you don’t know what I’m talking about!”