When you’re in your early twenties, retirement can feel impossibly far away.

There are usually more immediate things competing for your salary: rent, transport, groceries, a new phone, weekends with friends, helping family, paying off debt or simply trying to make it to the next payday.

Investing can easily become something you’ll do “one day.”

Maybe when you earn more.

Maybe when you buy a house.

Maybe when you turn 30.

The problem is that waiting for the perfect time can cost you one of the biggest advantages a young investor has:

Time.

You don’t need to be wealthy to begin investing. You don’t need R100,000 sitting in your bank account, and you certainly don’t need to understand every movement of the Johannesburg Stock Exchange.

Starting with R100, R500 or R1,000 a month may seem insignificant. But when that habit is maintained for decades, the mathematics changes dramatically.

South Africa’s financial regulator has long highlighted the same basic principles: start investing as early as possible, reinvest investment growth, keep contributing and diversify rather than putting everything into one investment. (FSCA)

The important lesson for young South Africans isn’t simply “save more.”

It’s learning how to build a financial system while you’re young enough to give that system decades to work.

Why Starting Young Matters More Than Starting Rich

Consider two people.

Thabo starts investing at 22.

He can afford only:

R500 per month.

His friend Jason decides R500 isn’t worth investing and says he’ll wait until he earns more.

Jason eventually starts at age 32.

He also contributes R500 per month.

Assuming both investments achieved the same hypothetical average return of 8% a year, their results would be dramatically different by age 62.

Thabo had 40 years.

Jason had 30.

That extra decade isn’t simply another R60,000 in contributions.

It’s another decade during which earlier contributions had the opportunity to generate returns, and those returns could potentially generate further returns.

This is compounding.

The Power of Compound Growth

Imagine you invest:

R10,000

and it earns a hypothetical:

8% in one year.

You now have:

R10,800.

If the R800 remains invested and the investment earns another 8% the following year, you’re no longer earning growth only on your original R10,000.

You’re potentially earning it on:

R10,800.

After another year:

R11,664.

Then:

R12,597.

Then:

R13,605.

The process can accelerate over time.

Real investment returns don’t arrive as a neat 8% every year. Markets rise and fall, and some years can produce losses. These examples are purely illustrations.

But they demonstrate why time is such a valuable asset.

Chart: What R500 Per Month Could Potentially Become

Let’s assume someone invests:

R500 every month

at a hypothetical average annual return of:

8%

with returns reinvested.

Years Investing Money Contributed Illustrative Value
5 years R30,000 ~R36,700
10 years R60,000 ~R91,500
20 years R120,000 ~R294,500
30 years R180,000 ~R745,000
40 years R240,000 ~R1.75 million

These are simplified illustrations, not investment forecasts or guaranteed returns. Fees, taxes and actual market performance will affect real results.

Look closely at the 40-year example.

The investor personally contributed:

R240,000.

Yet the illustrative value is around:

R1.75 million.

Most of that difference didn’t come from the investor contributing enormous amounts.

It came from time and hypothetical compounded growth.

That’s the advantage young investors often underestimate.

The Biggest Mistake: “I’ll Start When I Earn More”

This sounds reasonable.

You’re earning R12,000 or R15,000 per month and there isn’t much left after expenses.

You tell yourself:

“When I’m earning R30,000, I’ll start investing.”

But earning more doesn’t automatically create better financial habits.

Expenses have a habit of growing with income.

You earn more and upgrade the car.

You move somewhere more expensive.

Your cellphone contract increases.

You eat out more.

You subscribe to more services.

Your lifestyle quietly expands until the larger salary feels just as tight as the old one.

This is known as lifestyle inflation.

That’s why establishing the habit while you’re young can be more important than the initial amount.

If you learn to invest R300 from a R10,000 income, increasing that contribution as your income grows becomes much easier than trying to build the habit from scratch at 35.

Start With What You Can Actually Afford

Don’t misunderstand the message.

Starting young doesn’t mean investing so aggressively that you can’t afford groceries.

If R1,000 is too much, don’t invest R1,000.

Start with:

R100

or:

R250

or:

R500.

The initial objective is creating a repeatable system.

Suppose you start at 22 with:

R250 per month.

That’s only:

R3,000 per year.

At 25, your salary improves and you increase it to:

R500.

At 28:

R750.

At 30:

R1,000.

By then investing isn’t something you’re trying to remember.

It’s part of your financial life.

A Realistic Young Investor’s Budget

Imagine a 24-year-old earning:

R18,000 after deductions.

A hypothetical budget could look like this:

Expense Amount
Rent/household contribution R5,000
Transport R2,500
Groceries R2,500
Insurance R800
Cellphone/data R600
Debt R1,000
Entertainment R1,500
Emergency savings R1,000
Investing R500
Other expenses/buffer R2,600
Total R18,000

This person isn’t living like a millionaire.

They’re investing:

R500 per month.

That’s about:

2.8% of take-home income.

The point isn’t that everyone earning R18,000 should use this exact budget.

South African households have very different responsibilities.

The lesson is that investing doesn’t necessarily need to begin with a huge percentage of your salary.

Pay Yourself Before Lifestyle Spending Takes Over

One of the easiest approaches is to invest close to payday.

Salary arrives.

The investment debit order goes off.

Then you work with what remains.

This is psychologically different from saying:

“I’ll invest whatever is left at the end of the month.”

Because what is usually left?

Very little.

There is always something to spend money on.

Automating your investment turns investing into a regular financial commitment rather than an optional purchase.

Your First Investment Shouldn’t Necessarily Be Shares

Before rushing into the stock market, build your financial foundation.

A sensible sequence might involve:

1. A working monthly budget

2. Emergency savings

3. Appropriate insurance

4. Managing expensive debt

5. Long-term investments

These areas can overlap, but investing while ignoring everything else can create problems.

Build an Emergency Fund First

Suppose you’ve saved R5,000 and invest every cent into shares.

Two weeks later:

Your car breaks down.

Repair:

R4,000.

You need the money immediately.

Unfortunately, the market has fallen and your R5,000 investment is currently worth:

R4,300.

You’re forced to sell at an inconvenient time.

That’s why emergency savings and long-term investments should serve different purposes.

Emergency money should generally be accessible.

It could help with:

  • Unexpected car repairs

  • Medical costs

  • Urgent home repairs

  • Temporary unemployment

  • Emergency travel

  • Essential family expenses

Long-term investment money should ideally be money you don’t expect to need next month.

Protecting Your Income Matters Too

Young people often think insurance is something older people need.

But consider your most valuable financial asset at age 25.

It’s probably not your car.

It’s your ability to earn an income for the next 30 or 40 years.

If illness or disability prevented you from working, the financial impact could be enormous.

Appropriate cover might include, depending on your circumstances:

  • Disability cover

  • Income protection

  • Life insurance

  • Critical illness cover

  • Employer group benefits

  • Medical cover

Not everybody needs every type of insurance.

For example, someone with no dependants may have a different need for life cover than a married parent whose family relies on their income.

Don’t buy insurance simply because someone tells you that you “must have it.”

Understand:

What is covered?

How much is covered?

What does it cost?

What are the exclusions?

Do you already have cover through your employer?

Don’t Forget Your Employer Benefits

Before buying additional products, check your payslip and employment documents.

You may already contribute to:

  • A pension fund

  • Provident fund

  • Retirement fund

  • Group life insurance

  • Disability cover

A surprising number of employees don’t fully understand the benefits they already have.

Ask HR for the benefit schedule.

Know what happens if you:

Die.

Become disabled.

Leave the company.

Retire.

Understanding what you already have prevents unnecessary duplication and reveals gaps that may genuinely need attention.

Saving and Investing Are Different

People often use these words interchangeably.

They’re not quite the same.

Saving

Usually appropriate for shorter-term needs where protecting capital and having access to the money are important.

Examples:

Emergency fund

Holiday

Car repairs

December expenses

Investing

Usually involves accepting some level of risk in pursuit of longer-term growth.

Examples:

Shares

ETFs

Unit trusts

Bonds

Property funds

Retirement investments

Your investment horizon matters.

Money required in six months shouldn’t necessarily be invested the same way as money intended for retirement in 40 years.

Equities: Owning Part of a Business

An equity is essentially ownership in a company.

When you buy shares in a listed company, you own a small portion of that business.

Your return may come from:

Share-price growth

and/or:

Dividends.

Equities can provide attractive long-term growth potential, but prices fluctuate.

You might invest R10,000 and see it become:

R11,500

then:

R9,000

then:

R13,000.

Short-term volatility is normal.

This makes equities generally more appropriate for longer investment horizons than money you’ll need shortly.

Bonds: Lending Instead of Owning

A bond works differently.

Instead of buying ownership in a company, an investor effectively lends money to an issuer such as:

A government

or:

A company.

In return, the issuer generally promises interest payments and repayment according to the bond’s terms.

Bonds can play an important role in diversified portfolios and may be less volatile than equities in certain circumstances.

But don’t make the mistake of thinking:

“Bonds can’t lose money.”

Bond prices can move because of:

  • Interest rates

  • Inflation expectations

  • Credit risk

  • Economic conditions

  • Time remaining to maturity

Different bonds carry different risks.

What Is a Unit Trust?

A unit trust pools money from multiple investors.

A professional fund manager invests that money according to the fund’s mandate.

One unit trust might invest mostly in:

South African equities.

Another:

Government and corporate bonds.

Another:

Global shares.

Another:

Property.

Another could hold a combination.

This makes unit trusts useful for investors who want professional portfolio management.

But always understand what you’re buying.

Don’t choose a fund because it has an impressive name.

Read:

Its objective

Risk level

Asset allocation

Fees

Time horizon

and:

What it actually owns.

Diversification: Don’t Bet Your Future on One Company

Imagine investing your entire R50,000 portfolio in one company.

If that company performs brilliantly, you benefit.

But what happens if it collapses?

You’ve concentrated your financial future in one business.

Diversification spreads investments across different assets.

A diversified portfolio might include exposure to:

  • South African shares

  • International shares

  • Bonds

  • Property

  • Cash

The exact allocation depends on your goals and risk profile.

The FSCA’s educational material encourages investors to diversify deliberately rather than putting all their eggs in one basket. (FSCA)

Diversification doesn’t eliminate losses.

It reduces dependence on a single investment.

Chart: A Simple Diversified Portfolio Example

This is purely an educational illustration, not a recommended portfolio:

Asset Class Example Allocation
Global equities 40%
South African equities 25%
Bonds 20%
Listed property 5%
Cash/money market 10%

Visualised:

Global Equities — 40%
████████████████████

SA Equities — 25%
█████████████

Bonds — 20%
██████████

Cash — 10%
█████

Property — 5%
███

A young investor with a very long time horizon might choose a different allocation from someone approaching retirement.

There is no universal portfolio that is right for everyone.

Why Inflation Matters

Suppose you put:

R10,000

under your mattress.

Five years later, you still have:

R10,000.

You haven’t technically lost any rand.

But the purchasing power of that R10,000 may have fallen because prices increased.

Perhaps R10,000 bought a certain basket of groceries, fuel and services today.

Several years from now, the same basket might cost:

R12,000

or:

R13,000.

Your money remained R10,000, but it buys less.

That’s inflation.

This is one reason long-term investors look for investments capable of producing growth that can potentially outpace inflation over time.

The FSCA’s financial education material specifically treats inflation as an important consideration when planning investments. (FSCA)

Tax-Free Savings Accounts Can Be Powerful When You’re Young

South Africa’s Tax-Free Savings Account (TFSA) is particularly interesting for long-term investors.

The name can be misleading because a TFSA isn’t necessarily just a bank savings account.

Depending on the provider, qualifying investments can be held inside the tax-free structure.

According to SARS, returns earned within qualifying tax-free investments are exempt from:

  • Income tax

  • Dividends tax

  • Capital gains tax

From 1 March 2026, the annual contribution limit increased from R36,000 to R46,000.

The lifetime contribution limit remains:

R500,000. (South African Revenue Service)

That’s current for the 2026/27 tax year and is worth mentioning because many older South African articles still quote the previous R36,000 annual limit.

Why Starting a TFSA Young Can Matter

Imagine you contribute:

R500 per month

to a qualifying long-term TFSA investment.

That’s:

R6,000 per year.

You’re well below the current R46,000 annual contribution limit.

But the real benefit isn’t simply today’s tax saving.

It’s that investment growth can potentially compound inside the tax-free environment for decades.

Someone starting at 22 potentially has an enormous time horizon.

Be Careful With TFSA Withdrawals

There’s an important catch.

Your contribution allowance isn’t restored simply because you withdraw money.

Suppose you contribute:

R20,000.

Later you withdraw:

R10,000.

That withdrawal doesn’t erase the fact that you previously contributed R20,000 toward your lifetime limit.

Putting the R10,000 back later counts as another contribution.

SARS also states that unused annual allowance doesn’t carry forward, and excess contributions can attract a 40% tax penalty. (South African Revenue Service)

For this reason, repeatedly using a TFSA as an everyday savings account can waste valuable contribution room.

Fees Can Quietly Eat Your Returns

Suppose two investments produce identical gross performance.

Investment A costs:

0.5% per year.

Investment B costs:

2.5%.

That difference may not look dramatic when your portfolio is worth R5,000.

But as your portfolio grows and decades pass, recurring percentage-based costs become increasingly important.

Possible investment costs include:

  • Platform fees

  • Fund management fees

  • Advice fees

  • Brokerage

  • Administration fees

  • Transaction costs

  • Foreign-exchange costs

Don’t automatically choose the cheapest investment either.

Price isn’t the only consideration.

But always know what you’re paying.

Chart: Why Fees Deserve Attention

Consider a purely hypothetical R100,000 investment earning 8% before annual fees for 30 years, with no additional contributions.

Annual Fee Approximate Net Return Used Illustrative Value After 30 Years
0.5% 7.5% ~R875,000
1.0% 7.0% ~R761,000
1.5% 6.5% ~R661,000
2.5% 5.5% ~R498,000

This simplified example isn’t how every investment fee is calculated, but it illustrates something important:

Fees also compound.

Saving 1% annually can become meaningful over decades.

Don’t Chase Last Year’s Best Investment

One of the easiest mistakes for a young investor is looking at a list of funds and selecting whichever one returned the most last year.

Suppose:

Fund A: +30%

Fund B: +14%

Fund C: +8%.

Fund A looks obvious.

But what if Fund A invests in a highly volatile sector that happened to have an exceptional year?

Next year it could fall:

20%.

Historical returns are useful information, but past performance doesn’t guarantee future performance.

Understand:

What the fund owns

and:

Why you’re investing in it.

You Don’t Need to Check Your Investment Every Day

If you’re investing for retirement at 25, you potentially have 30 or 40 years ahead.

Checking your investment:

at breakfast

at lunch

and:

before bed

doesn’t make it grow faster.

In fact, watching every market movement can encourage emotional decisions.

You see:

-3%

and panic.

You sell.

A week later the market recovers.

Long-term investing requires accepting that markets move.

Your portfolio won’t rise smoothly every month.

A Market Crash Isn’t Automatically a Reason to Stop Investing

Imagine investing R1,000 monthly.

Markets suddenly fall 20%.

Your existing portfolio loses value.

Emotionally, investing another R1,000 feels wrong.

But your next R1,000 can now purchase more units of the same investment at lower prices.

This doesn’t mean markets can’t fall further.

They can.

But for investors with a genuinely long time horizon, periods of falling prices are part of investing.

This is why you shouldn’t invest next month’s rent.

Long-term money needs enough time to survive bad markets.

Increasing Contributions Can Be More Powerful Than Hunting for Higher Returns

Young investors often obsess over finding:

“The investment with the highest return.”

But your contribution rate is something you can actually control.

Suppose you start at:

R500 per month.

After your next salary increase, move to:

R600.

Then:

R750.

Eventually:

R1,000.

You don’t need to find a magical investment promising 25% returns.

Increasing how much you invest while keeping costs reasonable can have a massive effect.

Chart: Increasing Your Monthly Investment

Using a hypothetical 8% annual return for 30 years:

Monthly Contribution Total You Contribute Illustrative Final Value
R250 R90,000 ~R373,000
R500 R180,000 ~R745,000
R750 R270,000 ~R1.12 million
R1,000 R360,000 ~R1.49 million
R1,500 R540,000 ~R2.24 million

Again, these aren’t promises.

The purpose is to show the relationship between:

Contribution + return + time.

Don’t Ignore Debt While Investing

Suppose you have:

R15,000 credit-card debt

charging a high interest rate.

You also have:

R1,000 spare every month.

Should you invest all R1,000 while paying only the minimum on the card?

Perhaps not.

If your debt costs 20%+ annually while your investment might or might not earn 8%, reducing expensive debt could be financially more valuable.

Debt situations differ.

A home loan isn’t the same as payday debt.

But always compare:

What am I paying to borrow?

against:

What am I realistically expecting from my investment?

Don’t invest simply so you can say you’re an investor while expensive debt is quietly growing behind you.

Your 20s Are Also the Time to Learn

You don’t need to understand every financial concept immediately.

Learn one at a time.

Understand:

Budgeting.

Then:

Emergency funds.

Then:

Interest.

Then:

Inflation.

Then:

ETFs and unit trusts.

Then:

Tax.

Then:

Retirement planning.

Financial knowledge compounds too.

Someone who begins learning at 22 can understand dramatically more by 30.

Avoid Investment Scams

Young investors are heavily targeted online.

You’ve probably seen advertisements such as:

“Invest R500 and make R5,000 this week.”

Or WhatsApp messages saying:

“Guaranteed 300% return.”

Legitimate investing involves risk.

Be extremely cautious when someone promises:

  • Guaranteed extraordinary returns

  • No risk

  • Fast profits

  • Secret investment methods

  • Guaranteed cryptocurrency returns

  • Pressure to transfer money immediately

  • Returns for recruiting other investors

Verify financial-service providers through appropriate regulatory channels and never assume something is legitimate because it has a professional-looking website.

What About Retirement Funds?

Young workers should also understand retirement investments.

Depending on your employment and circumstances, these may include:

Pension funds

Provident funds

Retirement annuities

These investments are designed specifically for retirement and have their own tax rules and restrictions.

If your employer already contributes to a retirement fund, find out:

How much you contribute.

How much the employer contributes.

Where the money is invested.

What fees apply.

What happens if you change jobs.

Your retirement fund may already be your largest investment without you realising it.

Don’t Cash Out Retirement Money Casually

Changing jobs can make retirement money suddenly feel accessible.

Be careful.

Money withdrawn from retirement savings may have tax consequences and, more importantly, loses future years of potential compounding.

South Africa’s retirement system also now operates under the two-pot framework, which has specific rules around accessible savings components and retirement components.

SARS notes that savings-component withdrawals are taxed at the individual’s marginal income-tax rate. (South African Revenue Service)

Retirement money should generally be treated as long-term money rather than an ordinary savings account.

Build Your Own Investment System

A young person’s investment plan doesn’t need to be complicated.

It might look like this:

Payday

Salary arrives.

Day 1

R1,000 goes to emergency savings.

Day 2

R500 automatically goes into a long-term investment.

Employer contribution

Retirement fund contribution happens through payroll.

Every six months

Review your budget and investments.

Every salary increase

Increase your investment contribution.

That’s a system.

You aren’t waking up every morning wondering:

“Should I invest today?”

It’s already happening.

A Useful Rule: Invest Part of Every Increase

Suppose you receive a:

R2,000 monthly salary increase.

Instead of increasing your lifestyle by the entire R2,000, consider splitting it.

For example:

R1,000 — lifestyle

R500 — investing

R500 — savings/debt

You still enjoy some of your increased income.

But your wealth-building rate also improves.

Do that after several promotions and your investment contributions can grow significantly without making you feel as though you’re sacrificing everything.

Your First R100,000 Is Built One Payday at a Time

Seeing someone with a R500,000 investment portfolio can make investing feel impossible.

But that portfolio probably didn’t begin at R500,000.

It may have started with:

R500.

Then another R500.

Then another.

Eventually:

R10,000.

Then:

R25,000.

Then:

R50,000.

Then:

R100,000.

Investing is less exciting than social media makes it look.

There usually isn’t one magical trade.

For ordinary investors, wealth building often looks remarkably boring:

Earn.

Budget.

Invest.

Repeat.

For years.

10 Financial Terms Every Young Investor Should Know

1. Equities

Shares representing ownership in companies.

2. Bonds

Debt instruments through which investors lend money to governments, companies or other issuers.

3. Diversification

Spreading investments across different assets to reduce concentration risk.

4. Unit Trust

A pooled investment managed according to a particular mandate.

5. ETF

An Exchange-Traded Fund that can provide exposure to a basket of assets through one listed investment.

6. Money Market

Short-term interest-bearing instruments generally used for lower-risk, shorter-term purposes.

7. Compound Growth

Growth potentially generated on both original contributions and previously accumulated returns.

8. Inflation

The general increase in prices over time, which reduces the purchasing power of money.

9. Income Protection

Insurance designed to provide benefits under specified circumstances when illness or injury prevents you from earning income.

10. Retirement Fund

A regulated investment structure designed to accumulate money for retirement.

A Simple Checklist Before Making Your First Investment

Before sending money anywhere, ask yourself:

Do I understand what I’m investing in?

How long can I leave the money invested?

What are the fees?

Can the investment lose value?

Is the provider legitimate?

Am I diversified?

Do I have emergency savings?

Do I have expensive debt that needs attention?

Am I investing because of a plan or because someone online told me I’ll get rich?

If you can’t explain the investment in simple language, spend more time learning before buying.

Final Thoughts: Your Greatest Advantage Is Time

Being young doesn’t mean you have no financial advantages.

In fact, you have something a 50-year-old millionaire cannot buy:

More time.

A 22-year-old investing R500 doesn’t look impressive next to someone investing R10,000.

But give that R500 decades to compound.

Increase it when your salary increases.

Reinvest returns.

Keep fees under control.

Diversify.

Avoid scams.

Don’t panic during every market decline.

Protect yourself financially.

And keep going.

The most dangerous thought isn’t:

“I can only afford R500.”

It’s:

“R500 isn’t worth investing, so I’ll wait.”

Because five years later you may still be waiting.

Then ten.

Starting small gives you something money can’t buy later:

experience.

You learn how markets behave.

You learn how you react when your investment falls.

You learn how fees work.

You learn about tax.

You learn how to budget around regular investing.

Most importantly, you create a habit.

So if you’re 20, 23, 25 or 29 and wondering whether you’re too young to start investing, the answer is simple:

You’re not too young.

You may actually be at one of the best stages of your life to begin.

You don’t need to start big.

You need to start.

For official information about South Africa’s current Tax-Free Savings Account rules, contribution limits and tax treatment, see SARS Tax-Free Investments. For general consumer financial education and information about regulated financial services, visit the Financial Sector Conduct Authority.

Disclaimer: This article provides general educational information and does not constitute personalised financial, investment, tax or insurance advice. Investment values can rise or fall, and historical performance does not guarantee future returns. All growth calculations above are hypothetical illustrations and exclude factors such as taxes, investment fees and changing market returns. Consider your circumstances, product terms and, where appropriate, advice from an authorised financial professional before investing.

Categorized in:

Investments,

Last Update: Sep 7, 2026