A little really can go a long way when we use the investment approach of micro saving.
There is a misnomer that investors need lots of money to start investing. The challenge with this thinking is that it’s incredibly alienating for people who don’t have money left over at the end of the month and are trying to make ends meet.
What is micro saving?
Just like the name says, micro saving is the practice of putting small amounts of money aside. Think of it as the digital equivalent of what our grandparents did with a coin jar back in the day, dropping spare coins regularly.
Micro saving is about taking whatever amount of money is small and unnoticeable to you and tucking that away in a place you can’t spend it. So, for instance, you buy a weekly wrap at work that costs R35; if you pay with R40 and get R5 change, keep that R5 aside for your micro-savings. Or – if you think that you wouldn’t miss R100 a month – create an auto-saver account with your bank to automatically debits R100 a month.
It may sound trivial, but it’s not – and here’s why; it’s more about building a habit of saving than a large cache of money.
Mindfulness matters
Habits make us wealthy, not large salaries. So – good investing is more of a mindfulness issue than a wealth issue. Money comes in every month and is applied to a vague budget at the beginning of the month, and then, like a black hole, it just vanishes into a million little things and unforeseen expenses.
Do you have an emergency fund each month? Do you estimate and account for how much you spend tipping car guards and paying for parking? Starting to track these costs helps grow mindfulness around our money, leading to a change in our habits.
A micro saving app, banking feature or some other investment vehicle (Liberty’s Stash and FNB’s Bank Your Change are quite good) considers this lack of mindfulness by taking off that R5 from the wrap, R100 from the ballet recitals money, knowing you won’t notice. And then you have something like R400 at the end of each month saved away. It may not be the R2000 or R5000 you were hoping to save, but it’s better than the zero you were headed for.
From micro saving to micro investing
The follow-on benefit of increasing mindfulness and changing habits is that it doesn’t stop with micro-savings. As you store up a few thousand Rand in savings, you will be able to open an investment account. And – the more you save, the more you will want to save.
Looking at a zero-savings balance can be incredibly demotivating. Even increasing it by R50 a month can spark the enthusiasm to push it to R100 a month, then R200… then R400.
Sometimes it pays big to go small. Sometimes the best thing you can do today is start.