How our credit cards have destroyed our achievements

During a conversation with Eunice Sibiya, head of consumer education at FNB, she related a story that made me realise how credit cards, and general easy access to credit, has taken away the sense of achievement we used to get from saving towards a goal.

At the start of her career, Sibiya worked as a teller at a branch where customers would bring her their savings books and ask her to show them how much they had accumulated.

Despite being ordinary workers, their savings were substantial with tens of thousands saved up. Sibiya would speak to them and ask them about how they managed to save and what they were saving for.

Invariably it was for a house and they were frugal with their monthly expenses so that they could save for what was a very important goal for them. Each month that balance went up and motivated them to keep saving until they could cash it in and realise their goal.

Fast forward to the current day where Sibiya oversees financial education at FNB and what she sees is no longer savings books but credit cards and personal loans. In fact the bulk of the education is about how to get out of debt rather than explaining how to read your savings statement.

And, yes, before you say it, the banks, hers included, provide and make money out of all that credit. We can very easily track our household debt crisis to the banking industry’s credit spree in the mid-2000’s but we are still responsible for signing up for it, and believe me, we are the only ones responsible for repaying it.

But that image of Sibiya’s customers with their bank books fills me with a sense of nostalgia for a time that was a lot less complicated.

You had a certain amount of money, you lived within your means and you were able to sleep at night not worrying about how to pay the bank.

In her book Manage your Money, Live your Dream, Sunel Veldtman talks about her happiest time with her money.

It was when she had her first job and was earning a small graduate salary yet she was able to save for her wedding and buy a few nice things for her first home—and she still had money left over at the end of the month.

“As you earn more you will always find more things to spend your money on. Whereas once you were happy with a holiday in a rented house, overseas holidays or your own beach house have now become options. Before you know it, you support a lifestyle you never had in mind and you need to earn at a level that you never had in mind to support this lifestyle.”

When I was growing up a family holiday was a big deal—something we did once a year and something my parents had to save for.

It increased the value of that trip and going to the Waffle Hut was a real treat rather than something we did every day.

Today when we want to go on holiday, how many of us actually work out a budget and save towards it and then book a holiday based on what we have saved rather than what looked great in the brochure?

Most of the time we just hand over our credit cards and pay it off later, but does that somehow diminish the value of that holiday? By making everything more accessible and immediate, have credit cards removed our sense of achievement in acquiring those experiences or goods?

Credit cards also mean that we live perpetually in the future. It would be an interesting calculation to work out how much of our monthly salary has already been spent before it hits our account—our obligation to our mortgages, car finances, store cards, personal loans and credit cards.

Even if you settle your credit card at the end of the month, you are still depending on money coming in, rather than spending money that is already banked.

The challenge is how do we turn back the clock and return to those values of the savings book in a world that has become so materialistic and where keeping up with the Jones’s is robbing us of a sense of achievement and financial well-being?

I guess it starts with ourselves and learning to be happy with what we have. We know we feel so much better when we have a bank account with money rather than a credit card tying us into bondage, so why don’t we?

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