The best time to start saving was 20 years ago. The second-best time is NOW. This is a common place phrase or expression, but although lacking in freshness or originality, it remains one of the most fundamental truths of investing. 

Due to the marvel that is compound interest, the earlier you start saving the better. Compound interest, simply put, is growth on the growth of your investments (or interest on your interest), rather than only on the capital invested. 

This can be illustrated using simple maths: 

If you invest R10,000 at 10% per annum compound interest: 

• You will have R11,000 after 1 year. 
• After 2 years, you will earn 10% on the original R10,000 invested and 10% on the R1,000 of interest earned for a total of R12,100. 
• Repeat until year 10, where your initial R10,000 invested will have grown to R25,937. 
• By year 20, with no additional investments made by you, your R10,000 will have grown to R67,275. 
• If you had saved an additional R1,000 a year at the end of each year for the next 20 years, your R30,000 capital invested (R10,000 initial lump sum + R1,000 a year for the next 20 years) will have grown to R124,550. 

The magic ingredient to harness the full power of compound interest is TIME. 


The first step is to START NOW. 

It doesn’t matter how little you have to contribute and whether it’s a lump sum or regular monthly payments. You can invest in unit trusts from as little as R500 a month, or a lump sum of R10,000 (which you can then add to over time).

It is a stark reality that many South Africans do not work in the “formal” sector and may not have the benefit of saving for retirement with their employer. 

Fact: over 90% of South Africans do not have enough savings to retire comfortably. Which group will you retire in?