Financial planning for millennials in the South African economy has been quite a feat. Inheriting an economy marred by a post-recession job market, high student loan debt balances, a more expensive housing market and as a result, growing personal debt. Gen Z in comparison, are actively saving and investing for their future as a result of watching their older counterparts, but may also feel like they are not doing enough

South Africa is a country with a high youth population representing 14 million consumers. Financial planning for millennials and developing healthy money habits can have a significant impact on one’s financial future. This guide outlines five essential steps tailored to South African Millennials and Gen Z

Establish Your Emergency Reserve Fund

When planning financially for millennials, establishing an emergency fund is often overlooked. Start by creating an emergency fund that can last three to six months, or enough to cover your fixed expenses. When unanticipated events like job loss, medical emergencies, or unplanned bills arise, this fund serves as a safety net. You can progressively build up this reserve fund, giving you financial security and peace of mind, by saving aside a percentage of your salary on a monthly basis.

Set Up a Tax-Friendly Retirement

Planning for retirement may seem distant, but starting early is key to building a secure financial future. Allocate a portion of your income to a retirement investment vehicle that offers tax benefits. In South Africa, such investments receive contributions from SARS, providing additional incentives for long-term savings. By consistently contributing to your retirement fund, you not only harness tax advantages but also ensure a steady accumulation of capital for your future needs.

Protect Your Assets

Millennials between ages 30 and 39 are underinsured by an average of R1.4 million, according to the Asisa 2022 Gap Study. Insurance plays a critical role in safeguarding your financial well-being by protecting you from unexpected financial burdens. Review your insurance policies regularly to ensure they align with your current needs and circumstances.

Avoid Lifestyle Inflation

As your income increases, it’s tempting to indulge in lifestyle upgrades. This may result in taking on more debt and having multiple arrangements with credit providers. However, avoiding lifestyle inflation can significantly impact your financial stability in the long run. Instead of increasing spending with every raise, consider allocating a portion of your increased income towards boosting your savings.

Manage Debt Wisely

Countless millennials grapple with student loans, credit card debt, or vehicle financing. Responsible debt management is important to avoid falling into a cycle of being overindebted. Prioritise high-interest debt and develop a repayment strategy, allocating extra funds towards reducing outstanding balances. If repaying your debt is an issue finding out more the options available to you can lift the myths often associated with debt counselling.