Savings Accounts: Your Saving Grace
As South Africa is currently in a state of fiscal consolidation, mainly due to a high budget deficit, low growth and the energy crisis, South Africans should get on board and enhance their financial discipline on an individual level, with a view to creating a savings culture in our country.
Even though low-income earners are benefiting from a governmental focus on improved health care, service delivery, education and social grants, we will only feel this progress and see the difference in our daily lives, once we embrace a culture of saving.
Savings Accounts: a Sweeter Deal
Only 20% of South African adults opened up or continued to invest in savings accounts at a reputable financial institution last year, revealing that we have one of the lowest rates of saving in the world!
However, savings accounts are looking more appealing to South Africans after 1 March 2015, with the implementation of tax-free savings plans and improvements to retail savings bonds, sweetening the pot.
Then again, we have a lot more work to do before individual savings accounts become the standard among low-income groups. A combination of tradition, low confidence in financial institutes, insufficient salaries and a tendency to save in groups have been identified as obstacles holding back the growth of individual savings accounts.
A Rand in the Bank is Worth Two in the Wallet
Of those low-income individuals who do save, very few seek professional advice due to a perception that their savings aren’t significant enough to warrant this. Thus, poor financial literacy begets bad financial decisions, often costing them their hard-earned savings. Furthermore, people need to be steered away from mashonisas (loan sharks) and reckless lenders, warned of the dangers of the debt trap and encouraged to consolidate with reputable institutes like NDA.
Unsurprisingly, low-income earners have always found it a struggle to save in South Africa’s tough economic environment. However, a shift in mind-set is vital right now, where we view ‘every rand saved’ as a milestone towards securing health, education and retirement, and inevitably enjoying a better life.