The harsh reality of saving habits

A six-year old girl is left alone with a marshmallow and told if she demonstrates patience and waits 20 minutes, she will be rewarded with another.

She understands that she could indulge in two sweet moments of pleasure, however, the torment of waiting is almost unbearable as the marshmallow glowers at her salivating face.

At breaking point she reaches out to the marshmallow and just in the nick of time she is offered another delight which she gladly enjoys.

The principle of saving works the same way; saving the pennies you have today will yield rewards that are worth the wait.

All it takes is patience and discipline. Not simply accomplished, especially in the South African context.


What is this context and how do we motivate the young people to break the negative savings cycle?

To explore this, one has to consider the definition of youth. Who is the youth and how realistic is the ability of this group to save?

The Unesco defines youth as “a period of transition from the dependence of childhood to adulthood’s independence and awareness of our interdependence as members of a community”. Youth is a more fluid category than a fixed age-group.

It can be based, for instance, on the definition given in the African Youth Charter where youth means “every person between the ages of 15 and 35 years”.

From a global perspective youth are over-represented among the unemployed and underemployed. In South Africa the youth unemployment rate of ages below 35 years is at about 48.2%; with approximately 44.6% and 52.5% of unemployed men and women respectively. This begs the question, how does one expect a youth to save when they have nothing to save from?

It is almost impossible to address a poor savings habit without reflecting on the broader economic challenges.

A number of factors contribute to the levels of unemployment including poor economic growth and output, deepening poverty and widening inequality, and the legacy of apartheid among others.

However, it is during these times that saving habits become an important attribute in anyone’s life.

Should the availability of credit to students with no income to purchase clothes and repay the loan with interest be encouraged? One would think there are greater benefits to acquire savings for what we loosely coin as “retail therapy”.

South Africa’s financial sector has a role to play in driving a better savings culture in South Africa. Key to this has been the implementation of financial literacy programmes such as The Banking Association South Africa’s “Teach Children To Save South Africa”, which plays a critical role in educating and empowering young people and communities about responsible saving habits.

Financial literacy and education plays an important and necessary role in the management of finances of individuals; simply put, people have to be taught or informed about saving.

The Financial Services Board’s Financial Literacy in South Africa: Results of a baseline national survey estimates that two-thirds of South Africans aged 16 years and older (63%) play at least some personal role in directly managing the household budget.

The remaining respondents are reliant on other people for financial management.

It also states that the presence of a household budget is suggestive of a positive awareness relating to financial management.

Less than half of the respondents (44%) reported a household budget, while 51% of the respondents do not have a household budget and 5% were uncertain.

The survey further states there is a significant gradient of difference in relation to population group.

Coloured and black respondents (46% and 39% respectively) were significantly less likely than white and indian respondents (67% and 68% respectively) to report having a household budget.

This finding reflects material disadvantage and social inequalities that continue to characterise South African society.

There is a relationship between education levels and household budgeting, as well as a link to income: the higher the level of education or the greater the income, the more likelihood of reporting a household budget (70%% and 60% respectively).

Age also affects budgeting, as the likelihood of budgeting progressively increases with age. Individuals in their thirties and fifties (53% and 52% respectively) have the highest percentages with budgets.

Increments in the cost of living and a higher inflationary environment are eroding the disposable income of South Africans. This makes questions about “making ends meet” particularly important because of its reflection on people’s behaviour in times of economic crisis.

In any country, addressing the individual levels of transition such as learning, working and major life events such as marriage and health issues.

It is not only essential that these life changing moments are managed well, but it directly impacts on the ability or inability to save.

People need to start saving and be disciplined; in our 20s for instance we need to seriously consider security against disability, dread disease, retirement and life cover.

In our 30s we ought to be saving for our children’s education and care of parents or other family members and topping up our retirements.

In our 40s, we need to be putting money aside to assist our medical cover during retirement and looking at paying off our home loans. And in our 50s we need to review our financial status and perhaps re-evaluate our wills.

Instilling good financial habits from a young age will create a generation of adults with strong money management habits, even in the toughest times.

Luyanda Tetyana is the media and communications manager at The Banking Association South Africa

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