SAMKE Mhlongo of TNC Wealth Partners criticised the financial services industry for doing the same thing over and over again in an attempt to change people’s behaviour. Supplied
An intense panel discussion at the launch of this year’s July Savings Month initiative last week sent out a clear challenge to financial consumers and financial institutions alike: it is time to redefine South Africa’s savings paradigm from one focused on “saving towards deferred expenditures” to one where savings are repurposed to achieve personal development, economic growth and wealth accumulation. One after the other, the five panellists delivered on the request from the South African Savings Institute (Sasi) that they challenge savings conventions and introduce innovative and “crazy ways” to save.

Samke Mhlongo of TNC Wealth Partners was critical of the financial services industry for doing the same thing over and over again in their attempts to change behaviour.

“Our track record speaks for itself - savings outcomes are declining year after year - so why are we still doing the same things?” she asked.

Her main concern was that current savings initiatives required people who could barely make it through a month to divert a portion of their income towards an intangible future benefit.

Mhlongo’s crazy savings solutions centred on personal development and growing wealth under an accommodative pro-business government. To underpin this message, she challenged industry stakeholders to foster entrepreneurship and help individuals establish small businesses and create their own wealth.

“We need to make changes that impact ordinary South Africans against the backdrop of declining GDP, rising unemployment, especially among the youth, and the ticking time-bomb of social unrest,” said Mhlongo.

Savings advice for struggling middle-income families centred on being frugal and learning to say no to unnecessary purchases.

Mapalo Makhu of Women and Finance framed her debate within the familiar consumer refrain: “I feel stuck between ‘I want to save money’ and ‘I want to live my best life now’.” She proposed a range of crazy savings interventions, from unplugging electric devices when not in use, to bathing your children in the same bathwater, to chasing free lunches at corporate functions and, of course, not shopping on an empty stomach. “Our parents and members of older generations exhibit a strong savings culture - so why have we become such a consumer-oriented society?” asked Makhu.

Journalist Maya Fisher-French steered the conversation in a different direction by suggesting that South Africa’s problem was not due to a poor savings culture, but its terrible relationship with credit. She sketched a comparison between an Indian and South African low-income consumer in the market for a new washing machine.

In India, you save R300 a month for 10 months and buy a machine for R3000, whereas local consumers take delivery of the machine upfront and pay it off at R300 a month over two years. The interest payments, totalling more than the price of the asset, flow into the hands of shareholders in the microlending sector.

Fisher-French advocates saving small monthly amounts, consistently, over long periods to benefit from investment growth and compound interest. “It is about going out and finding some way to save that does not cause you pain,” she said. “You will not notice the R200 per month in your budget, but after 20 years you will be amazed at the substantial amount in your preferred savings vehicle.”

Her crazy ways to save include using digital innovations such as Stash App and the bank-your-change types of services offered by some banks. These features allow you to round up every purchase you make and put the difference into the digital equivalent of a piggy bank. For example, if you purchase something for R47.50, the bank charges you R50 and diverts the R2.50 “change” to savings. Other ideas include converting loyalty account balances directly into unit trusts or opening a separate digital bank account to become more “hands on”’ with your grocery budget.

“It does not matter how many times a financial institution tells you to save; it is up to you to make the decision. Somewhere, somehow, you must come to that crossroad and say I’m going to save,” said Nicollette Mashile of Financial Fitness Bunny, whose personal savings mantra is that it does not matter how much you earn but how much you keep and where. She seconded Fisher-French’s concerns about the credit industry and noted that it was far too easy for low-income earners to obtain store credit, microloans and short-term personal loans.

Mashile caused ripples of concern among attendees when she proposed that the South African Revenue Service takes the decision out of consumers’ hands by charging a savings payroll tax and diverting this to a tax-free savings account or similar vehicle.

“I hope that government makes saving a legal deduction, because we aren’t going on to do it by ourselves,” she said. For those who prefer conventional approaches, she advocated family planning and avoiding the perils of lifestyle inflation and career tax, both linked to keeping up with the Joneses.

“Every July, you switch off your TV and avoid the messages from financial institutions and money experts, because savings is a foreign language,” said Gerald Mwandiambira, the acting chief executive of Sasi. He singled out inertia among the country’s disillusioned youth as a major obstacle to reinventing South Africa’s savings paradigm. “How do we start talking to those people and make them realise they need to be a bit crazy about saving?” he asked.

But it was Mhlongo who encapsulated the discussion. She called on the audience to “remember July Savings Month 2019 as the month South Africa chose to think ‘outside the box’ about what it means to not merely save; but to create financial security and well-being for all”.

PERSONAL FINANCE