The role of moneyUbukwazi Yini? Maizviziva Here? Did You Know?
Money is a strange thing. So many of us take it for granted, yet it is the single thing in life that buys a lifestyle. Without money, without an income, we simply can not survive. Money becomes the starting point in the personal financial well being of the male factory worker. Now that we earn some money the next question is how do we spend it, save it, and most importantly how do we invest it?
From the $800 a month that the male factory worker earns, he can set aside some for retirement , groceries, rates, electricity and more. The male factory worker should also consider setting aside some of his money for future use. Herein lies the concept of investments.
As it is, the male factory worker has a number of reasons why he should invest some of his money:
- Firstly the male factory worker has got future commitments that he needs to take care of. His last child, Rudo, is only 2 years old. Sometime around 15 years from now, the male factory worker will have a very big financial commitment – school fees.
The male factory worker would want his daughter to go and study at one of the South African universities. As a foreign student, she will be required to make an upfront payment. For instance, if Rudo decides to study medicine at a South African university her father will spend no less than half-a-million rand for her tuition during her six years study duration. He will alson need to pay an additional R100 000 for her rsidence fees. What is even worse for the male factory worker is that he has to pay her fees upfront every time.
Unless the male factory worker starts investing some of the money he earns today he will not be able to meet these financial obligations.
- Secondly the male factory worker needs to set aside something for retirement. We have dicussed in the past why the male factory worker needs to save for retirement. The earlier the male factory worker starts to save for retirement the better.
- Thirdly the male factory worker might want to save money to meet a future commitment. For instance, the male factory worker’s house is not yet complete. He believes that, if he can invest some of his earnings, he will be able to raise enough in 10 years to finish the construction of his home.
- The male factory worker has always longed to travel. He has made a commitment that he will take his wife to a well known resort such as Mauritius. He has targeted to do that in the next 5 years. However, to be able to do that, the male factory worker must set aside some of his money towars this holiday.
- The male factory worker is well aware that the world that we live in is fulll of uncertainties – and that at one point he will require large sums of money to be available for use in emergencies. For instance the male factory worker or a member of the family might require a big outlay of cash. If he does not set aside something and invest it to earn some interest, it means he will not be able to meet these obligations. The male factory worker therfore needs to set aside an amounty for contingencies.
The male factory worker has a myriad of investment options available to him. He could consider putting his money in a pillow as cash, invest in fixed deposits, put it in a savings account, by unit trusts, buy shares at the stock exchange, or invest in the venture capital business.
The first two are less risky whilst the rest have some level of risk. Let’s briefly look at each investment option:
- the male factory worker can keep his money in the form of cash but he knows that he is not very disciplined and he will therfore use it up somehow. For this reason he is not likely to follow this investment option. This investment option does not earn the male factory worker any interest.
- the male factory worker can invest in fixed deposits through banks. This is an investment option that is obviously very secure. The less the risk – the less the return.
- Savings account offer security and very low return. Banks and building societies offer this facility.
- Buy unit trusts – these are available from investment houses and life insurance companies. The male factory worker will need a financial advisor to participate in this investment option. Unit trusts are relatively safe and give good returns.
- Shares from the stock exchange can be available for the male factory worker, however he will need massive education to understand it. He definitely needs a very good advisor. This investment option is highly risky and also offers higher returns.
Lastly the male factory worker can consider venture capitalism which means investing his money in business. This is a high risk option that can give high returns. However, the male factory worker is advised not to consider this option because of it’s high risk disposition