For example, he adds, the total monthly repayment before the cut was R21,674 on a R2m home loan. After the 0.25% cut, the monthly repayment drops to R21,329 – a saving of R345 each month. “You then have the choice between two options: either enjoy having an extra R345 to spend each month; or, if you can afford to do so, you could re-invest that money in a way that results in long-term financial relief,” Goslett says.

“If you choose to channel the money you’re saving right back into your monthly bond repayment, thereby keeping the repayment at the rate before the interest cut, you can potentially shed months off of your lending term and save hundreds of thousands on interest charges.

“To illustrate the potential savings, by consistently adding an extra R345 to your monthly home loan repayment four years into your 20-year loan term, you would save about R115,964 in interest charges by the end of the loan term. Additionally, you’d shorten your loan term by about nine months, meaning you’d pay off the loan faster.”

Goslett says the same principle applies to all types of financing, including personal and car loans. “Understanding that budgets are tight for most people, if you cannot afford to keep the repayments the same on all debts, then pick the loan with the highest interest rate charges and focus on paying that off first.

“It can be a massive eye opener to do the calculations on how much you end up paying for something once you factor in all the interest charges. Seize the opportunity whenever you are able to afford paying in extra towards debts, as this will bring far greater financial freedom in the long term.”  

When setting up a long-term savings account, choose “an interest-bearing option that is separate from your everyday banking to avoid the temptation of using it for non-emergency expenses” says Goslett.

“Interest rates can vary between accounts, so it’s important to research different products to find the one that offers the best return. High-interest accounts often require you to lock your money away for a fixed period, which could be a challenge if you need immediate access in an emergency. However, this feature can be beneficial if you find it difficult to resist spending money that’s readily available,” he says.

“As a final piece of advice for those who are struggling to get into the habit of saving, setting up a debit order or automatic payment each month to avoid making it optional. If a predetermined amount of money is transferred into a savings account automatically each month, it takes the decision-making process out of the equation and ensures that a contribution is made towards the contingency fund regularly with very little effort on your part.

“While it’s never easy to carve out room in the budget for savings, the long-term consequences of neglecting it far outweigh the short-term discomfort of tightening your purse strings when finances are stable. My advice is to take full advantage of the interest rate cuts and get into good habits while you can afford to do so.”

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