Throughout Heritage Month, South Africans are encouraged to celebrate their culture and the diversity of their beliefs, histories, and traditions. In the spirit of celebrating her heritage, Emmanuella Fernandes shares some of the money lessons that were inadvertently shaped by her parents’ and grandparents’ experiences.
Many years ago, my grandfather literally jumped ship. He travelled to South Africa from Madeira Island in search of a better life for his family. He eventually settled in Vanderbijlpark where he was able to find work as a bricklayer. They did not have much and, as such, my dad started working to help support the family. Having worked in spaza shops for most of his young adult life, he eventually started his own business.
When I was old enough, my dad let me work as a cashier in his business. It was then that I first developed a relationship with money and very quickly came to understand the value of it.
I remember going to The Carousel Casino, where I was able to put some of the learnings into practice. My dad would give us each R50 to play the arcade games. My brother would run off and spend all his tokens in no time. I would always play the games that gave me tickets, because if I collected enough tickets over a long period of time I would be able to exchange them for something I really wanted – a large teddy bear. I didn’t know it then, but by being more discerning about what I did with my tokens, I was learning to understand the importance of delaying gratification.
Lesson 1: Delaying your gratification can lead to greater rewards
At the arcade, I had two options: I could spend my tokens for the instant gratification or save the tickets and use them for something that I really wanted. If I spent them, just as my brother did, I would squander my chance to get that teddy bear. Adopting a savings-focused approach, I set my tickets aside, much like saving money in a savings account at the bank.
We tend to spend most of our money on the goods and services we want in the moment without considering what our future selves may need. The first step towards planning for your future is knowing what you want to achieve one day. It then becomes easier to work towards spending slightly less in the moment and allocating a portion of your money to these goals.
Lesson 2: You need to protect your money from inflation
While I was setting more and more tickets aside to hopefully one day afford the teddy bear, as time passed, the teddy bear became more expensive. My tickets couldn’t keep up. In other words, the value of the tickets that I had stowed became lower over time. This introduced me to the risk of inflation.
The cost of goods and services goes up over time; what R100 rand can buy today will not be the same as what R100 will buy next year. For this reason, we need money we have saved to grow in “real” terms. Investing speaks to buying assets that will generate a return higher than inflation and grow the value of our money over time.
One of the greatest benefits of investing is the power of compound interest. Compound interest is earning interest on the interest you have already earned – basically your money is working for you. If you are patient and stay the course, you can reap the benefits of compounding over time.
Lesson 3: Don’t steal from your future self
Naturally, my brother would always run out of tokens and would ask to borrow some of mine. This just meant that the next time we were at The Carousel he had to pay me back, and he would have even fewer tokens to play with.
Very few of us can afford to fund big-ticket items from our salaries alone, and this is where debt usually comes in. Debt is not necessarily a bad thing if used appropriately, but the cost of servicing debt can eat away at our ability to buy the things we really want and prevent us from building wealth over the long term. It is important to understand your options and plan so that you can leverage time and earn rather than pay interest.
Lesson 4: Pay your money lessons forward
Watching my parents and grandparents work very hard and being exposed to money at an early age helped me learn some of these lessons early on. By having open and honest conversations with our children about money, we can cultivate a better savings culture, and consequently build a more secure financial future for them. In my opinion, learning how to make your hard-earned money work even harder for you is one of the most important lessons we can pass down from generation to generation.