From a culture of consumption to a culture of saving

July is national savings month and with the general savings culture and environment in South Africa relatively poor when compared to other emerging economies, creating a culture of saving for young people is fundamental.

Our annual gross saving ratio was below 15% from 2004 to 2007 compared to around 30% for countries like India and China. However, in 2009 this increased to 17% showing good signs for improvements.

Household debt rose by almost R900-billion in the last 10 years, an annual average rate of just over 14% a year, while the household income only rose by 10.5% a year over the same period.

This means that households continue to live beyond their means while saving almost nothing.

Considering that the youth constitute 48.2% of the country’s population, the National Youth Development Agency (NYDA) will continue to collaborate with other key stakeholders such as the Savings South Africa Savings Institute (SASI) in promoting and facilitating a culture of savings among young people.

This is achievable through changing mind-sets and motivating young people to put money aside for future use instead of spending all that they have on consumer items that will soon be forgotten.

Through the NYDA’s Financial Literacy programme over 690 young people were taught the importance of saving and even assisted in opening savings bank accounts.

The programme focused on rural communities and was rolled out in Thaba-Nchu in the Free State, KwaMhlanga in Gauteng, Siyabuswa in Mpumalanga and Mooiplaas in the Western Cape and Kwelerha in the Eastern Cape. These young people collectively saved over R170 000.

Financial literacy encourages better financial decisions
The NYDA plans to encourage young people to form savings co-operatives where young South Africans can save together for collective action and better manage their savings through financial literacy programmes.

Financial literacy programmes also educate young people about the different types of savings and investments.

These include money that is put aside for future use such as emergencies or social events and money put aside for the purpose of investment such as starting a business or growing ones assets.

According to Microfinance Opportunities, financial literacy and education aims to strengthen behavioural changes that lead to increased incomes, better management, protection of scarce assets and effective use of financial services.

Financial literacy programmes use adult learning principles and practices to guide learners in their perceived daily experiences and challenges towards healthier spending habits.

If properly delivered, financial literacy can provide youth with the necessary financial skills to manage their money more effectively.

A financially literate youth can make better financial decisions and work towards their financial goals to improve their economic well-being.

In Kenya, for example, 33% of the population is excluded from financial services (unbanked) with only 22% of the population making use of financial services from formal institutions.

Of the Kenyan population, 18% still use semi-formal institutions such as savings and credit co-operatives, while 33% use informal systems like rotating savings and credit associations and accumulative savings and credit associations.

Saving in the form of stokvels has also been a big part of South African culture long before it was formalised as savings accounts or investment.

Stokvels exist mainly in rural or peri-urban areas, as clubs where members contribute fixed amounts to a pool of money on a monthly or fortnightly basis. Each member has a turn to collect the earnings for themselves.

It is estimated that one in two black males in South Africa is a member of a stokvel and that there are over 89 000 stokvels nationally investing approximately R12-billion every year.

Exploitation of South African youth
In recent times however, youth have become more and more obsessed with a culture of consumption, constantly striving for instant gratification in the form of the latest technological gadgets, fashion trends and hair styles.

This has been fuelled by aggressive advertising and an untransformed financial sector that continues to administer vast amounts of unsecured lending.

The vulnerable and desperate young people have fallen prey to such exploitative trends and the dominant culture of material consumption.

Young South Africans are faced with the challenge of having to overcome such consumerism in pursuit of developing a culture of saving.

A major challenge faced by the NYDA is getting young people to distinguish between “want” and “need”. Consumers are taking full advantage of this with services that offer same day delivery to your door or clothing accounts for student’s offered interest free.

Young people need to be made aware of the importance of saving as early as possible as is done through SASI’s July Savings Month campaign where primary and secondary school pupils are taught how to save.

Saving requires a culture of self-control, sacrifice, financial freedom and taking a long term view, all of which the youth are perceived to lack.

However, it is the NYDA’s view that through adequate guidance and education, more young people will begin saving to secure future prospects.

Yershen Pillay is the executive chairperson of the National Youth Development Agency

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