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16 Mar 2015 11:35
In 2014, the Savings and Investment Monitor survey found that about one-third of South African “baby-boomers” – those born
between 1946 and 1964 – have made no formal provision for their retirement,
with 46% believing that their children should care for them. A further 63% of
all South Africans are expecting to support family members when they are old,
and yet 30% have not seen a financial advisor and a staggering 30% don’t budget
for the future at all.
It’s not hard to see why South Africans have been
labelled as among the worst savers in the world.
Preparing for the future through formal
savings accounts such as retail bonds or retirement plans is an essential, not
a luxury, and South Africans need re-assess their spend and budgets to ensure
that they start saving. The FinScope SA 2013 Consumer Survey underscored the
problem: it revealed that 58% of adults are not setting any savings aside, and
12.5 million South Africans are experiencing financial difficulties.
Research undertaken by the FNB Savings and
Investments team found that 92% of those who do not have savings agree that
this is important, even though only 44% of those taking in a salary have any
form of long term savings or retirement product in play. One of the issues is
that many people don’t understand the solutions on the market and are unsure of
how to effectively take advantage of them. Inflation only adds to the problem.
Many families earn below the R250 000
threshold, which places them at a financial disadvantage; they often dip into retirement
savings in order to stay on top of monthly expenses. Household debt is also a
concern. Recent figures show 57% of South Africans are experiencing debt
delinquency, compared to 35% in the United States – and the latter figure is
still considered uncomfortably high. Then there are the twins of procrastination
and trust. The former finds people filing savings under “I’ve got time” and the
latter impacts their ability to hand over hard-earned cash to someone they
don’t know, for a product they are not entirely sure they understand.
Fortunately there are solutions that have
been designed to help South Africans adopt a more focused approach to saving
their money. The government and financial fraternity have been working on
cultivating a culture that encourages people to save, rather than relying on
government or family to see them through their old age and those cliché-riddled
In 2004, the National Treasury launched the
RSA Retail Savings Bonds that come in two flavours: fixed interest and
inflation linked. The bonds were developed to encourage households to start
saving through a product that delivers guaranteed returns, comes at an
affordable cost and isn’t weighed down by additional fees. They can be
purchased for as little as R1 000 and give their owners complete control over
their own savings portfolios. Instead of a third party investing their money,
consumers can manage how much they invest, and they get competitive rates. Individuals
now have access to benefits that were originally only the remit of businesses
The fixed rate retail savings bonds have
rolling maturities over two, three and five years with a fixed rate until
maturity. Consumers can invest anything from R1 000 to R5-million, and they can
do so easily – the bonds purchasing process has been made as simple as possible
to ensure a limited barrier to entry and a seamless integration into a savings
mind-set. They can be bought online, in person and over the phone. The
inflation-linked retail savings bonds were introduced in 2007 and these have
three, five and 10-year maturities and are inflation protected. Interested
parties can invest anything from R1 000 to R5-million.
The goal of Retail Savings Bonds is to give
people an alternative investment route that’s secure and reliable, with good
returns. This allows South Africans across most income brackets to create their
own financial security, empowering them to make good use of their money over
the long term.
The National Treasury has embarked on education
initiatives through the retail savings bonds to encourage South Africans to
pass on a legacy of saving to their children. The bonds available are
affordable and are not age restricted, which means parents can use their money
to purchase bonds for their children and give them access to their accounts. It
gives the younger generation a very clear window into the savings world that
encourages them to learn more about how money can evolve and how to use it to
prepare for their education, first home and, one day, for their families.
In a world where economies dip and dance
and money is often a daily concern, savings can make all the difference in
creating and maintaining a comfortable, secure future.
To find out more about Retail Savings Bonds click here
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