It’s Money Smart Week, and this year’s theme is “Money Smart: The Power of Possible”. The campaign aims to promote financial literacy and consumer awareness, while showing how better financial knowledge can help people make informed decisions and improve their financial outcomes over time.
This is also a campaign that has a connection close to home, with our very own Chief Enablement Officer, Carel Nolte, having been involved in conversations that helped shape part of the strategy behind Money Smart Week South Africa.
Being money smart is not only about earning more money – it is about understanding how to make your money work harder and protect its value over time. Earlier this year, we had an exclusive interview with the Deputy Governor of the South African Reserve Bank (SARB) and a member of the Monetary Policy Committee (MPC), where we explored important topics around the economy, inflation and monetary policy. This conversation highlighted why understanding the factors that influence the value of your money is an important part of becoming financially smart.
The SARB plays an important role in managing inflation through monetary policy. One of its key responsibilities is keeping inflation low and stable, with the MPC using the policy interest rate as one of its main tools. When inflationary pressures are too high, the SARB can raise interest rates to make borrowing more expensive and encourage saving, which can reduce demand and help ease inflationary pressure. Conversely, when inflation is contained, lower rates can support borrowing, spending and economic activity.
Inflation refers to the general increase in the prices of goods and services over time, meaning the same amount of money can buy less in the future than it can today. For anyone looking to grow and protect their wealth, understanding inflation is therefore an important part of making informed financial decisions.
This is where the concept of a real rate of return becomes important. Your investment may generate a positive return, but what matters is how much that return grows your purchasing power after accounting for inflation. For example, if an investment earns 10% while inflation is 7%, the real return is approximately 3%.
One way to think about investing against inflation is through CPI+ strategies. CPI, or the Consumer Price Index, is commonly used as a measure of inflation. A CPI+3 target, for example, means aiming to achieve a return of inflation plus 3 percentage points over the relevant investment period. Similarly, CPI+5 aims for inflation plus 5%, while CPI+7 aims for inflation plus 7%. The higher the CPI+ target, the greater the return sought above inflation – although achieving higher returns generally comes with greater investment risk.
These concepts are particularly important when thinking about retirement. The earlier you start investing, the more time your money has to grow and compound. But preparing for retirement is not simply about starting early – it is also about understanding where your retirement savings are invested, what those investments are designed to achieve, and whether they are keeping pace with the rising cost of living.
As Nicola Comninos, CEO of EasyRetire, puts it: “The earlier you start planning and investing for retirement, the more time your money has to grow and compound. But it’s just as important to understand where your retirement savings are invested and how those investments are working towards your long-term goals. Having greater transparency can help people make more informed decisions, while understanding inflation and CPI+ targets can provide a useful perspective on whether their money is growing ahead of the rising cost of living. Money Smart Week provides an important platform for these conversations, helping people take greater control of their financial future and build towards a more secure retirement.”
For Money Smart Week, the idea is simple: financial knowledge can help turn possibilities into better financial outcomes. Understanding inflation, looking beyond headline investment returns, and considering whether your wealth is growing ahead of the rising cost of living can help investors make more informed long-term decisions.
CPI+ strategies provide one framework for thinking about this – not simply asking, “How much did my money grow?” but “How much did my purchasing power grow?”
Ultimately, being money smart means understanding your money today so you can make better decisions for tomorrow – whether that means starting to invest, reviewing where your retirement savings are invested, or taking steps to build a stronger financial future.
Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by an external contributor as general market commentary and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice