Youth, discipline and saving

July is savings month in South Africa and all of us are reminded, and rightly so, about the importance of saving given our worrying and lingering low savings rate. Our total gross savings rate declined from 16% in 2011 to 13% in 2012.

The positive news is that household savings have slightly increased from 1.6% to 1.7% in 2012, although the average gross savings rate for households has been a worrying 1.3% for the past eight years. More still needs to be done.

Saving is important to enable us to retire comfortably and afford items without taking debt, paying for unexpected (large) expenses and to create wealth.

Although saving is crucial for our wellbeing, it can be a difficult act to perform. Even educated, employed and well informed adults find saving a challenge.

The challenge is profound for the unemployed, or those who earn very little or irregular income. It is probably even more profound among the youth, who are currently struggling to find jobs and face other various challenges like peer pressure.

There are various reasons why we struggle to save, but I am going to focus on one: discipline. Like many good values in society, there are certain ones that are arguably universal and therefore transcend race, nationhood, gender or religion.

Discipline, as with telling the truth irrespective of its implications for you, is a worthwhile value. Values are very effective if inculcated in us when we are very young, and this can be best done by parents and relatives.

If they fall short, then by the education system. And if the education system falls short too, then later by self-awareness or empowerment.

A disciplined society lays a good and solid foundation for a great society, because discipline determines our performance in class, on the sports field, at work and how we manage our finances.

Discipline reaps the benefits
The ability to work hard requires self-discipline. Monks spend many years training to discipline their minds and control their passions.

Given that sainthood at this stage is for a selected few, behavioural economics has tried to step in and provide us with some useful analysis in terms of how we actually behave.

It challenges the old classical and neoclassical economics that all of us are perfect rationale beings who are selfish, have access to all the information, and are able to process and comprehend it to always make the right decisions.

Our reality and unique nature as human beings is that we are conscious, and have free will and emotions.

In many instances our emotions get the better of us for good or bad; whether it is in the form of retail therapy when we are depressed, when our finances are tight, or when we donate to charities.

Saving is largely a behavioural challenge because it requires a conscious and hard decision, followed by action, to postpone instant gratification for future wellbeing, and the discipline to stick with this decision and action.

Naturally, adults do not like to be told what to do and how to live their lives. And the reason is largely because of our egos that whisper to us that we know better than the next person.

The ego also wants us to be better than our friends and neighbours in everything, despite the fact that our incomes might not enable this.

So what can be the sensible advice to the youth?

Try to inculcate a culture of (self) discipline in yourselves in whatever you do. Save before you spend and automate the saving to be deducted before other items.

From the first salary you earn, try to have a retirement plan, insurance policy, saving account for emergencies and an investment account for wealth creation.

Stick with them. Resist the temptation of instant and excessive gratification, especially when it is not affordable.

Enduring self-worth should be more about how we relate to others and the environment we live in, than conspicuous consumption or owning all the assets we want but might not need. Inculcate a passion for reading, since some of the mistakes are largely because of lack of information.

Lastly, invest in your health; this too requires the discipline to exercise regularly and eat properly. Without good health, the ability to work, earn an income and have a prolonged good life becomes severely diminished.

Olano Makhubela is the chief director of financial investments and savings at the National Treasury

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