Good intentions fail to translate into savings in SA
Many South Africans fully intend to become diligent savers but are just not translating these intentions into action. This trend was highlighted in a survey conducted by Sanlam, as part of its National Savings Month activities. And the high debt rate in the country remains one of the biggest obstacles to saving.
According Karin Muller, head of Sanlam Growth Markets at Sanlam Personal Finance, the survey highlights the continued need for South Africans to become more financially savvy. “National Savings Month has once again placed the very low savings rate in South Africa under the spotlight. It has forced individuals to place a microscope on their savings habits, and to understand how to start saving. We hope it will spur some individuals into taking the necessary action to secure their financial stability and security.”
The poll, conducted on Facebook on Sanlam’s National Start Something Day page, found that nearly 55% of respondents want to have a more financially secure future and want to start saving as a result. But just under half the respondents say they fail to do so, as they have nothing left to save after paying their expenses.
Muller says the biggest concern is the country’s high debt rate. According to the latest Quarterly Bulletin released by the Reserve Bank, South Africa’s household debt to disposable income was just under 77% in the first quarter of this year. While this is lower than 2008’s level of 82%, it comes at a time of low interest rates—with the repo rate currently standing still at its lowest point in more than 30 years. Muller says, “Despite the low interest rates, we’re still not getting rid of our debt, and that’s one of the biggest impediments to saving.”
The poll also found that one in ten of us cannot control our spending habits, and will most likely get into debt using our credit card on a shopping spree. And two in ten say we can’t save because we’re unwilling to skimp on our lifestyle. Muller says our perception of value has become skewed. “Many of us find it difficult to put R300 away in a savings product, but spend R300 on a pair of shoes fairly easily. Consumer behaviour is often such that immediate gratification gets priority—but saving hard earned cash can be equally rewarding.”
Muller says there are a number of steps we can take in order to become a nation of savers:
Get rid of debt:
She says not all debt is bad, such as debt incurred when buying a house. “Debt allows access to ‘big ticket’ items such as property that for most of us would be impossible through savings. But it is vital to put extra money away to pay off debt, and to ensure you do not incur unnecessary debt.
Start putting a small amount away in a savings product as soon and often as possible. “Regularly putting something away is the most important thing, especially in a low interest rate environment.” While this is often more easily said than done - the poll found that two in ten fall into debt because our expenses are more than our income - it is definitely something which should be made a priority.
Put money away before spending it:
Ideally savers should set up their account so that savings are taken out shortly after being paid, and before other debit orders go off. In that way, the money is out of the account, and cannot be spent. Muller says, “Invariably there’s nothing left by the end of the month, so take the savings out before this happens.”
Become educated on the value of savings:
Consumers should see their savings as a way of investing in themselves, by paying themselves regularly. “Savings are an enabler: they enable us to take our dreams, and make them a reality or something achievable.”
In encouraging South Africans to make their dreams a reality, Sanlam launched its savings campaign, through its National Start Something day. According to Muller, “The idea is to encourage people to make the most of every opportunity they’re given, and to make their own opportunities, from learning a new language, to saving for retirement. The sooner you invest in something, the sooner you’ll reap the rewards.” The campaign on Facebook already has thousands of fans. The National Start Something day will be officially celebrated on September 2.