Horrible truth about saving in South Africa
*This article was originally published on August 2019 and has been kept in its original form
South African Household Savings Ratio is negative What this means is that although some are saving through Unit Trusts, Retirement savings products or Tax Free investments, more households are not saving and actually taking up credit to fund : Cars, education or credit cards. “Household Saving Rate in South Africa increased to -0.10 percent in the first quarter of 2019 from -0.50 percent in the fourth quarter of 2018. Personal Savings in South Africa averaged 4.75 percent from 1960 until 2019, reaching an all time high of 23.80 percent in the second quarter of 1972 and a record low of -2.50 percent in the fourth quarter of 2013.” – https://tradingeconomics.com/south-africa/personal-savings If we compare ourselves in a global context – According to the World Economic Forum’s “The Global Competitiveness Report 2012–2013” South Africa’s gross national saving rate was 16.5% of gross domestic product, compared to China’s of 51%, India’s of 31.6%, Russia’s of 28.6% and Brazil’s of 18.4%.
Needless to say we are pulling at the shortest end of the piggybank. To save is learned behaviour and the only way to get into the habit is to start the habit. How ever small or large your salary is, savings need to be automatic and made a priority – a simple way to do this is to speak to an independent financial advisor and set up a monthly debit order in a Unit Trust, in that way you have complete flexibility regarding contributions and disbursements, without being penalised if you miss a payment or cannot stick to your plan – the golden rule here is JUST START.
Here are 5 ways to start saving
1. Set up a debit order on the day you get paid, it’s 2019 – nobody believes that you’ll save what is left after the month – Make savings automatic or they won’t happen.
2. Double check bank statements and make yourself aware of the “invisible drip“ of money from your account – R50 a day is R1500 a month, and without interest will yield you R18 000 a year. Review your budget and make the necessary cuts.
3. Review policies that you own – Short term and Life Policies – i have created savings plans for clients based on only savings made from these two components – more often than not, there is fat to trim.
4. Maximise your tax benefits from certain savings products – Think Retirement savings and Tax free investment plans.
5. Pay off expensive debt first – The interest charged on credit cards, personal loans and retail accounts can be exceptionally expensive and once they are paid off, you will have a lot of room in your budget to save. Should you need any assistance in setting up savings or reviewing a budget or insurance cover, get in touch with an independent financial advisor to help you with the new good habits.
