JOHANNESBURG - Saving for a rainy day isn't easy. Saving up for a comfortable retirement is even harder, especially when your country is undergoing another recession, your currency is weak, your nation has a junk credit rating and your government is facing corruption allegations.
With so much economic and political turmoil to contend with, it's little wonder that South African millennials aren't stashing away nice little nest eggs or amassing significant savings. But South Africa's savings problem is much more than a contemporary issue tied to current events...
South Africa has long been a nation of spenders, not savers. More likely to borrow than to budget, South Africans have topped global charts time and time again when it comes to personal debt. The country has also found itself at the bottom of the heap when it comes to financial literacy amongst developed nations.
From banks like Old Mutual, to Wonga and even the JSE (Johannesburg Stock Exchange), a wide array of experts, businesses and organizations have been calling for better financial education in South Africa for the better part of a decade. No educational improvements in this area have materialised. In fact, even plain mathematics in South Africa is worsening, with proposals to make the subject non-compulsory now on the table and pass rates lowered to ensure more pupils progress in 2017.
It's little wonder then, that today's millennials are ill-equipped to make savings and that many seem likely to follow in the financial footsteps of their parents.
Here are a few of the headline statistics:
- 42% of millennials are unaware of the fees they are paying service providers
- 51% believe their fees amount to less than 1% (3% is the industry average)
- 83% underestimated how fees can lead to lower investment outcomes
These findings indicate a major lack of awareness about how savings, pensions and investments work amongst young South Africans, further highlighting the country's problem with saving. It isn't just that South Africans don't have a culture of saving (although this is also true to a greater extent), it's also that there are serious gaps in knowledge amongst those who do take steps to save.
This re-emerging pattern couldn't come at a worse time. With the country in the midst of serious economic turbulence and uncertainty, making savings and spending prudently is more important than ever. Cost of living hikes and growing unemployment are both common symptoms of recession, which could push young South African's finances to breaking point.
How can South Africa help young people start saving shrewdly? Are you in the know about how service provider fees affect your savings? Have your say below.
- BUSINESS REPORT ONLINE