South Africans need to start saving
July is Savings Month – but how much can South Africans really save in these turbulent times, especially since we still have the one lowest household savings ratios in the world, according to Prem Govender, the chairperson of the South African Savings Institute. (SASI)
She says “At SASI, we believe a strong focus on financial inclusion by improving financial literacy across the population is key to improving this ratio. In our increasingly tough economic environment we need to find ways to save and avoid the credit trap. As the economy gradually recovers, interest rates may rise over the short to medium term, which will make paying off debts more difficult. We need to avoid financial blind spots and drive a savings culture to break the cycle of inter-generational debt.”
So how do we change our poor culture of saving?
Just get going.
Getting started is normally the problem – and with all the financial strife most South Africans have faced recently, the argument that we just don’t have money to save, seems justified. Yet, we all have to start some time. Covid-19 and all the employment upheavals it has brought with it, has taught us that we need to have some money in the kitty. We need to be prepared for the unforeseen. So no matter how small the amount – just start saving!
Set realistic goals
The reason we so often fail to reach our goals, is because they are unrealistic when we set them. When you set impossible targets and don’t reach them – chances are you are going to give up and not try again. Split your goals into short term and long term and commit to them.
Short term goals
This can be paying off unsecured debt to a particular creditor – like your credit card, personal loan or retail store account Paying off debt frees up monthly basis. Your monthly debt installment can then be your monthly savings amount.
Setting aside money for your child’s current or future level of education, medical costs and holiday seasons – are also examples of short term savings goals. Short term goals can actually be anything you want it to be.
Review your goals
Circumstances change. Covid -19 and lockdown has seen incomes fluctuate. Constantly review your savings goals and make them align with your income.
Adjust your lifestyle to suit your budget
It sounds cliché, but one of the best things we can do is to live within our means. This might entail cutting down or completely going without certain things. It definitely warrants a relook at what is a “want” and what is a “need” in your life.
Draw up a budget which truthfully reflects your financial situation
There are two main reasons that budgets do not work.
- We don’t stick to what we have put down on paper
- We are not honest with ourselves when we draw up the budget.
If you know that you are spending R1000/ m on eating out and entertaining – then it makes no sense to put down R500 on your budget, simply to make yourself feel better about your spending habits. The best way to get your budget to work, is to be honest about your income and expenditure and stick to it as best you can
Get rid of your debt
Any time that you can pay off debt, is an opportunity to save that money you have previously spent on it. You can do this by attempting to personally make arrangements with your creditors and perhaps systematically paying off one debt at a time – or you can choose to go under debt review.
Your registered debt counsellor will be able to negotiate with our creditors for lower monthly installments on your accounts – by lengthening the repayment terms and/ or lowering the interest rates. You will make one monthly, consolidated payment to a registered payment distribution agency (PDA) and they will pay each creditor accordingly from there.
A good debt counsellor should be able to draw up a restructured debt plan which should see you become completely debt free within 5 years or less. Any longer, and it isn’t a viable option.
As South Africans we simply have to change our spending habits and our savings culture. We do not have the luxury of just going along like we always have. Covid-19 has been a game changer. We have to up our game.