You are independent with very few commitments. Your focus is on consumption, for example buying your first vehicle and going on holidays. You save very little and therefore your financial capital is either non-existent or low.
Do not forget that the most valuable asset you possess at the moment is your human capital. Human capital is an individual’s ability to generate future savings and wealth or in quantitative terms: the present value of a person’s future salary. It is increased through education and career decisions, and for most people it peaks early in their career and declines towards zero at retirement.
If you understand how precious this asset is, the need to convert it appropriately to wealth, i.e. the requirement to do financial planning, is clear.
The risks that need to be addressed during this phase could be the inability to repay debt, or unforeseen illness and/or disability that could prevent a person to continue to earn an income.
Pentagon Financial Solutions PTA (Pty) Ltd can provide a client with advice and the appropriate product solutions inclusive of inter alia medical aid and medical insurance and the structuring of an emergency fund for unexpected expenses. Income Protection to guard against extended periods of illness, or cover for temporary or permanent disability is of specific importance for young professionals at the start of their careers. Continuous advice and assistance in investing savings within a diversified portfolio, structured according to a client’s individual risk profile, within an appropriate time horizon, also forms part of our services.
Albert Einstein coined compound growth as “the eighth wonder of the world”.
Look at the following table as an example:
R300 with a contribution increase of 10% per year
|Term in years||Growth||Cumulative investment||Cumulative growth||Total value|
|5||10%||R 21,978||R 6,087||R 28,065|
|10||12%||R 57,375||R 43,855||R 101,230|
|15||14%||R 114,381||R 191,925||R 306,306|
|25||16%||R 354,049||R 1,947,003||R 2,301,052|
|35||18%||R 975,688||R 11,660,214||R 12,635,902|