The savings KISS - keep it separate and simple

Sylvia Walker | 25 July 2023

Sylvia Walker is a financial planner at Andrew Prior Consultants. She spent many years in a senior management position at Old Mutual before venturing out of the corporate world. She is also a freelance finance writer and author of several non-fiction books.

It’s national savings month which may seem a bit of a joke given all the financial pressures we’re facing. It’s been an expensive year so far, with rising interest rates, inflation and increased electricity tariffs battering our budgets. And life tends to happen, hitting us with unexpected expenses.

I’ve had my fair share in the past few months. I had just returned from a dream holiday when my car needed a service, my clutch needed replacing and my car’s remote stopped working. I just got all that sorted when my eight-year-old washing machine decided it was time to retire! So, it was one major expense after the other.

If you don’t have some kind of buffer in place, these curveballs can have a long-lasting impact on your financial health. The only way to fund these expenses is to incur debt, and this would need to be paid back, putting even more strain on your budget. Read more: What does credit cost?

Stay in control

By planning and budgeting right from the start, you can be prepared for any crisis. Keeping your savings separate and simple is my version of KISS – you stay in control of your money and are prepared, no matter what happens in life. Read more: How do I set up an emergency fund?

I have various savings pots for different reasons, and paying money into these pots is part of my monthly budget. It’s not always about preparing for a crisis, though – I save for fun times as well, such as my recent holiday. As a family, we have a holiday fund which we all contribute to on a monthly basis.  This money is invested in an equity-linked investment as we dip into it every two or three years.

Then I use different savings pockets off one bank account to save for different things – one is for vehicle-related expenses, one is for home maintenance and one for general emergencies. And I have another account for managing income and expenses from my investment property. All of this is kept separate from my main transactional banking account which I use for day-to-day living expenses.

I also have an investment account for no specific reason – it came in rather handy for spending money on my recent trip. I’m a bit of a savings junkie but keeping things separate keeps me focussed. If all my income went into one big pot, I would be tempted to spend it all every month and then when a crisis hit, I would flounder looking for the money to deal with it or haul out my credit card.

There are many reasons why it is a good idea to have separate savings pots for various needs - your emergency fund to your savings for festive season expenses or even school fees. Following the KISS approach forces you to actively manage your money and avert financial crises.

Tips for saving smartly  

  • Identify specific needs and set goals - know what you need to save for and set goals (it doesn’t need to be a specific amount you are targeting, but it could be how much you can put away every month). Read more: How do I set savings and investment goals?

  • Decide if your savings are short-term (two years or less) or longer-term and save or invest appropriately. Shorter-term savings should be in a bank savings account, and longer-term in a market-linked investment such as a unit trust. Read more: What is a unit trust fund?

  • Pay yourself first every month - make your contributions part of your budget and put them right at the top of your expense list. Use our Budget Planner.

  • Make your savings automatic – set up debit orders or automatic transfers to your savings and investment accounts so you don’t have to remember to transfer funds.

  • Keep investing even if you have withdrawn – make it part of your budget now and forever. Even if you don’t have to dip into your home renovation fund for a few years, for example, building up a tidy pot of money will always come in handy.

  • Start with what you can afford, even if it’s R100 into each pot. Whatever you put away now is money you won’t potentially have to borrow in the future to fund an expense.