If you have never taken advantage of a unit trust investment, consider the following… Inflation remains a constant threat to the South African public. While the western world is concerned with negative inflation, we as South Africans are becoming even more concerned that what we have now… will be worth even less in a few years’ time.
Statistics have indicated that the household savings percentage is way below the accepted norm for a developing economy and that only 10% of working South Africans would have saved enough to maintain their pre-retirement lifestyle after retiring.
Initially, when considering these statistics we should be alarmed but after looking into this at a deeper level, I can begin to make sense of these statistics. The average South African places any money available at the end of the month (if any), into a bank savings account which on average will yield returns of 2-5%. With inflation projected to be 6.5% for this year, the average consumer loses between 4.5-1.5% of their savings money in REAL terms every year when placing their money into a savings account. So why should they save? Would you ‘invest’ in a vehicle that loses money every year? Surely not….
As a financial advisor, one of the tasks we face is to create wealth for our clients. Wealth has been described as ‘the number of days you can survive without physically working, and still maintain your standard of living’ according to ‘Rich Dad’ Robert Kiyosaki. By nature our standard of living increases in cost, at inflation per year. If we choose to save to be wealthy in future but we cannot afford to maintain our standard of living because our savings cannot keep up with inflation, you have not created wealth but rather destroyed it.
There is a solution to this dilemma – A UNIT TRUST INVESTMENT
A unit trust has all the benefits of a savings account with much more important features. You have access to the funds within 2-3 days notice, you can put lump sums in, monthly contributions, take out and put back as much as you please.
Even more importantly, a Unit Trust can deduct the funds off your bank account (debit order) before you have spent them, forcing you to save before you spend instead of spend before you save. Above all else, Unit Trusts offer investors REAL returns (returns above inflation) on a consistent basis. As a savings vehicle this is a benefit that nobody can afford to ignore, just like as South Africans we cannot afford to save in a savings account.
By Richard De Villiers
This article was adapted for Smart Money and was taken from: https://money101.co.za/unit-trusts-real-savings-account/