We have to change our mindset around saving

South Africans are notoriously bad at saving – with many having little to no savings at all to fall back on when an emergency strikes. This was once again highlighted in the various campaigns run in July – which is National Savings Month. Sadly, Covid-19 and the subsequent lockdowns have seen those who have managed to save, go through their savings in their attempts to survive these turbulent times. So how does one respond to someone who says that they just do not have money to save?

Sebastien Alexanderson, CEO of leading debt counselling firm National Debt Advisors says that the one thing we have to do, is acknowledge the dire situation many find themselves in. “It would be foolish and insensitive to dismiss the financial strife which most South Africans, especially the middle class – find themselves in these days. It is quite understandable that up to 80% of middle income earners have little to no emergency savings on hand. When the initial lockdown hit, it hit hard. Consumers found some relief in the payment holidays offered by banks and creditors at the time, but soon found themselves having to once again service their debt, and see to daily necessities on adjusted incomes. This caused huge strain and South Africans had to dip into their savings, which for  many – is now depleted”

“It is for this reason that we encourage all our clients at NDA, to take the money they are saving from paying lower monthly installments on their debt  – and either aggressively save it all – or split it between paying off their existing debt faster and directing  the rest to into some  form of savings. Sadly, many consumers who are not under debt review who have access to credit, have once again fallen into the vicious debt trap of borrowing more, having to pay back more and sinking deeper and deeper into debt. It is no coincidence that the people with the highest levels of unsecured debt, also have the least savings on had”

Alexanderson also firmly believes that it is not only the literal saving of money which will help South African consumers, but also our change in mindset about money,  and a change in our spending habits.

How and where can money be saved?

• Identify the differences between wants and needs: If you have been used to some luxury in life – consider foregoing some of these “extra’s” and rather direct that money towards an emergency savings fund
• Change your mindset about material goods defining your worth: We live in time of flashy pics, influencers and aggressive product sales pitches. We need step back from all the hype and evaluate what is really important in our lives. Is it better to spend R10 000 on designer clothes and gadgets, or could that money be better invested in a child’s education?
• Stop procrastinating and start saving: One of the biggest obstacles to saving – is to start it. There is always some reason we can’t do it. Those reasons may be completely justified – but even the small amounts add up. So even if you start with R50 at a time – just put a savings plan in place and start!
• Insert a savings element into your budget and automate your savings: By making saving a part of your life and your budget, it develops into something that doesn’t feel strained after a while. Most banking apps have the facility to automate the transfer of money from the account into which your salary is paid to a savings account. Set this up for whatever amount you feel comfortable with and just let it run.
• Get rid of your debt: Every rand that you spend on paying off your debt, can be put towards savings or investments of some sort. Develop a plan to aggressively diminish your debt. If you overwhelmed and uncertain of what to do – but you are committed to becoming debt free – then contact a registered debt advisor who can assist you in that regard.
• Save practically: Making small, practical changes in your lifestyle can add up to huge savings. With the recent increase in electricity tariffs, this is one area of our lives that we should be striving to save in. Switch off your geyser during the day and replace energy draining down lighters with LED bulbs. Thaw your frozen goods in some water instead of using the microwave. If you save R10 on electricity everyday – that equates to R300 per month. Multiplied by 12, that sees you saving R3600 for the year. That is no small feat – especially if you can take that money and direct it to a savings vehicle or debt repayment.

Saving money is hard in these uncertain times, but it is because of that exact uncertainty that we need to change our mindset and condition ourselves to save.