Hayley Brown | Executive | Business Development | PPS Investments | mail me |
July is savings month in South Africa. This is a month where national savings awareness campaigns are run to look at fostering a culture of savings for South Africans.
Historically, the South African household savings ratio (the income saved by households during a certain period of time) has mostly remained in negative territory since the Global Financial Crisis.
However, this savings month is different. While in 2018 the South African Savings Institute led a campaign entitled #crazywaystosave, the theme for 2020 is the more pragmatic #waystosave.
The campaign focus is on how individuals can adapt their financial plans and build financial resilience within the current challenging economic environment.
The disservice of dissaving
Recent research by Ipsos and News24 revealed that as many as 60% of South Africans are having to reach into their savings to cover their expenses.
This low savings culture is further exacerbated by the tendency of consumers to spend more than they earn. This is coined as ‘dissaving’ and over the past five years, the spending levels of South Africans have continued to increase at a gradual pace – at the expense of savings.
So, where have South Africans been spending? According to Statistics South Africa, the biggest expenses are housing and utilities, followed by transport. Interestingly, households spend more on recreation and culture than on education.
However, spending trends tapered off during the recent lockdown period, with research from Visual Capitalist showing that SA consumers cut back on spending in most categories, except for groceries and home entertainment.
Another area where South Africans are struggling to save is for retirement. According to a 2019 report released by National Treasury, only 6% of South Africans will be able to maintain their standard of living after retirement.
The result is that many retirees are having to rely on taking on debt and relying on family to survive, the latter placing some people in the middle of simultaneously caring for their parents and their children.
Referred to as the ‘sandwich generation’ – they are placed under pressure to strike the balance between meeting their immediate family needs and building their future financial security.
How to start saving smartly
The lockdown due to COVID-19 undoubtedly created financial distress and underscored the critical imperative of saving.
By adopting a proactive approach to achieving financial security as an individual, and as a family, will engender a culture of saving resilience, while building intergenerational wealth.
We provide opportunities to assist ageing parents by giving them access to lower administration fees during their retirement years, while encouraging the good practice of saving for their children through opening and connecting an investment for them.
Inter-generational wealth
Building intergenerational wealth starts with fostering a savings mindset. Over the long term the incremental savings from reduced administration fees compound, and can ultimately contribute to helping a family reach their investment goals.
Especially during these times, many are looking for solutions that will make the money that they have work harder for them.
