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What is ultimately required for a sustainable economy is for consumers to save and invest more

With almost 60% of South Africa's Gross Domestic Product (GDP) coming from consumers, it is somewhat encouraging to note the current boost in consumer confidence, which has seen Retail sales surpass expectations and make an impressive surge to 4,6% in May 2010.

Some call it the residue of World Cup mass hysteria.

Whatever the case maybe, in a recovering economy such as ours, which is still overshadowed by job insecurities and heavy household indebtedness, consumer spending can only contribute to a slow and short-term economic recovery.

What is ultimately required for a sustainable economy is for consumers to save and invest more. Unfortunately, statistics show that South Africans have a poor savings culture.

Our nation is polarised between the conspicuous spenders and those living below the bread line.

What many of us do not realise is that a nation's savings helps build infrastructure and finances businesses that create sustainable employment and future income, which ultimately grows the economy. 

Many people hold the misconception that being an investor is a tedious and complex process. Questions such as, "when should I invest, why should I invest and what should I invest in", often take different shapes and forms, yet the essence often remains the same.

The answers are quite simple:

When to invest? The best time to invest was yesterday, but since you missed that train, today is also a good time.

Think about it, instead of spending R 250 a week, you can discipline yourself and invest it. You could have R 1000 after a month, R 12 000 in a year and that adds up to R 60 000 in five years!

Imagine the interest you could potentially earn. The secret lies in a technique called Rand Cost Averaging ("RCA").

If you invest a fixed rand amount each month in a unit trust holding a portfolio of instruments ranging from shares to money market instruments (depending on your risk appetite), you will buy less units when the unit price is high and more units when the price is low.

This is the power of RCA. Over a long period of time, your average cost price per unit will be lower than the average unit price.

Why should you invest? Such an investment can easily buy you a decent vehicle, or act as a reasonable deposit for your house, or second property. You would have earned and used your interest effectively, instead of paying high interest….now that's a great reason to invest.

What should you invest in? Invest in products that have proven track records. If the investment world looks complex, speak to reputable asset manager or seek advice from an accredited Financial Adviser.

By diverting from over-spending to investing, you can accumulate a sizeable nest-egg in a surprisingly short period of time. Investing offers people the opportunity to receive highly competitive returns on their investments.

Now, think about it; that pair of fancy jeans you want to buy, how fashionable will they be in five years from now, compared to an investment portfolio….you decide which one is worthier!

Sylvester Kgatla is a Unit Trusts Specialist at Absa Investment