When it comes to building wealth you need to have different strategies and these require different investment vehicles. These are your saving and investment strategies in order of importance:

Pay off debt: There is no point paying a microlender 25% and earning 5% in a bank account.

Emergency savings: The only way to prevent yourself going into debt again is to have an emergency fund. Start small and contribute to an emergency fund even while paying off your debt. Ultimately your aim is to have at least three months of expenses saved in an emergency fund. Select a product that is easily accessible like a money market fund or no cost savings bank account.

Retirement fund: Make sure you maximise your tax benefits and invest as much as you can tax-free for your retirement either through your company retirement fund or through a low cost retirement annuity.

Life goals: These would be medium-terms goals like a deposit on a house or car or your children’s education. These are things you should save for not take out debt to pay. The choice of investment would depend on your time horizon. Two years or less, stick to a high interest account or money market fund. Over two years consider a low equity unit trust or fixed income unit trust.

Your mortgage: By increasing your bond repayments by 10% each month you will be bond free four years early. On a mortgage of R800 000 you would save R200 000 in interest.

Wealth building: Once you have settled your debts and taken care of your retirement you can start investing to build long term wealth. Start with a low cost unit trust or exchange traded fund and if the investment bug catches you, you can start your own share portfolio or start a property fund.

First published in City Press.