How to build confidence to save in a sustainable way
Prior to Covid-19, South Africans were already some of the world’s worst savers. The SA Reserve Bank cited the gross national savings rate to be 15.9% in the third quarter of 2020 – close to half of the optimal level (30%) outlined by Trevor Manuel.
Fast-forward and the country may be catapulting to a record savings low. Financial literacy is critical to help turn the situation around.
The statistics make for sobering reading:
- There was a 100% increase in debt counselling over lockdown. (ICAS, via Sanlam Benchmark Report 2020)
- Just 6% of South Africans are on track to retire comfortably. (Brand Atlas survey of over 15 million South Africans)
- 49% of South Africans had no retirement plan at all. (Brand Atlas survey)
- Only 49% of South Africans have enough saved to cover the bills for three months. (Sanlam internal survey, conducted by Catalyst Research & Strategy)
- More than four in every ten South Africans reported their finances had been severely impacted by the pandemic.
- Six in every 10 said they’d used money from their savings / emergency fund to cover their expenses.
Mariska Oosthuizen, Head of Brand at Sanlam, says, “We all desperately want to see these statistics improve, both for the well-being of individuals and for the financial health of the nation. Improved financial literacy can empower people to master their money and grow the confidence to better manage their money. Financial confidence can drive positive financial behaviours, such as saving. This in turn, fosters the socio-economic inclusion so critical to sustained GDP growth.
“As a purpose-led brand, we’re committed to fostering financial confidence. The Sanlam Moola-Money Family Game Show is a creative expression of this, using a fun format to level up South Africans’ literacy. Every episode focuses on a ‘money rule’ and features two families competing to answer financially oriented questions, with the ultimate prize being confidence.” .”
Spend less, save more. Repeat. This is the money rule for the second episode of the Moola-Money Family Game Show.
The episode features single mom Ivy Ubisi, with her eldest daughter. Ivy supports all five members of her household, including her daughter and younger sister, who are currently full-time tertiary students. Some of her biggest financial fears include having no savings and no emergency fund, plus relying on overdraft and the inability to pay her debts in time.
Her story is one that resonates with many South Africans in similar situations. Women’s financial situations are especially strained. Covid-19 has exacerbated the pay gap – in fact, the World Economic Forum believes the pandemic has set gender equality back by a generation. Stats SA found men are more likely to be employed and have better paying jobs, earning approximately 30% more than their female counterparts. Women are also more likely to head up single-parent households; Stats SA recently revealed that 43.1% of children live only with their mothers.
Additionally, women are more cautious investors than men, which hampers their ability to grow what they have. ResearchGate suggests this is because they have fewer financial resources available, so feel like they can’t afford to take risks.
Oosthuizen says, “Covid-19 has had serious consequences for many people, but the toll on women has been profound. In the current climate of job losses, mounting debt and uncertainty, it’s no wonder people are struggling to save. However, it’s imperative to have the confidence to set goals, make a plan and to ask for professional help should you need it.”
Here are some savings take-outs from episode two of Moola-Money:
1. Pay yourself first: It’s the golden rule of saving. Before you do anything else, move your money where it needs to be to support your savings goals – from contributions to a retirement annuity and child’s education fund, to investments. It’s all about self-care – in this case, caring for your future self.
2. Reprioritise your finances: Discipline and focus are key to saving… spending is the opposite. Take some time to relook your budget and try to be strict when it comes to shaving off unnecessary expenses. Automate your ‘pay yourself first’ payments as much as possible. If you never see the money, you won’t be tempted to spend it! Remember, you’re aiming for 20% of your take home pay to go to savings.
3. Know thyself: It’s important to spend some time thinking about your money personality – are you a spontaneous spender, born budgeter or a bit of both? Think back to your childhood – how were you raised to think about money? Does this inform the way you view it today? What are your financial values? What are your financial goals? Do the thinking upfront. You need to have a thorough understanding of self to be able to draw up a holistic plan you can stick to. It’s important to do a similar exercise as a family.
Oosthuizen adds, “Another objective of Moola-Money was to get households talking about the often-taboo topic of money. These honest, courageous conversations need to happen often to ensure everyone is aligned and working towards shared goals.”
4. Understand what’ll earn optimal interest: Savings vehicles serve different purposes and earn varying amounts of interest. It’s critical to identify which vehicle is best suited to your goal – for example, a fixed term savings account for a longer-term goal – and then to compare interest rates across different products. Remember to max out your tax-free savings every year, if possible.
5. Make your goals visible: The more ‘visible’ and tangible your goals feel, the more they’ll stay top-of-mind. Give each goal a name and an end date – be as specific as possible.
6. Seek advice: In the current climate, many are struggling with innumerable unforeseen challenges. It can be extremely empowering to visit a financial adviser to devise a doable roadmap for a healthy financial future. That’s one of the best ways to attain financial confidence.