Viviers says consumers should ensure that every single rand is working for them.
The recent reduction in the repo rate means that consumers’ monthly instalments on secured loans have decreased, but many people might take the additional cash flow and spend it, whereas if they kept their instalment at the level at which it was before interest rates were reduced, they would pay off their loans faster, says Viviers.
Consumers should use any saving or extra income to pay off their credit as fast as possible, he says.
“You can pay this into your home loans or vehicle finance or if you have unsecured credit, pay that faster.
“Once you have taken care of your credit, you should put the money lying in your bank account to work.
“Most people have money in their accounts that they need for their daily expenses, but some people also have extra money that they could be saving in a fixed-term savings plan to earn higher interest,” he says.
There is about R195 billion lying in savings accounts that is not earning any real interest, he says.
Many people look at what interest they can earn on a fixed-term savings account or perhaps a call account, but they don’t realise that the money in their transaction account should also be paying them interest, he says.
Viviers says you should look at your finances once a month and see what you can save in terms of your expenses. You can use these savings to pay off debt faster and start earning interest on saving or investment.
This includes making sure that you use the most suitable bank account, which involves looking at the fees you pay and the interest you earn.
Consumers do themselves a disservice by not saving up for annual expenses, but take on additional credit, Viviers says.
“If you own a car, you would have to have it serviced at least once a year, but people don’t save for that and when their car service comes up, they pay for that by using credit.”
Smart-savings behaviour means creating a savings account for Christmas presents, vehicle maintenance, or your children’s school fees.
“If you save for the long term - for instance, to invest for your retirement or a home improvement that you want to do in three or five years’ time - you can fix that savings account, and the longer you fix it the more interest it earns,” says Viviers.
Smart-savings behaviour is to spend less on coffee every day. For example, if you normally buy two cups of coffee every day at R30 a cup, but reduce this to one cup a day, you can save R30 a day. Multiply this by 300 cups a year and your saving comes to about R9000.
If you put that money into a savings account on which you earn compound interest, it turns into a sizeable investment, he says.
Viviers points out that this saving could be applied to other expenses, such as cigarettes, alcohol and eating out, among others.