July is National Savings Month. Nice concept, you think, but how do I start saving when I have so much debt? 

According to the latest Credit Bureau Monitor (CBM) data, 9.76 million of South Africa’s 24.31m credit-active consumers have impaired credit records. This means that 40% of consumers are struggling to repay their debts. Consumers’ debt burden totals a whopping R1.6 trillion.

The CBM also shows there are a total of 82.42m consumer credit accounts, which means that the average credit-active consumer has more than three such accounts.

Many people ask: “Should I put money aside to save, or should I pay off my debt?”

The Credit Ombud handles disputes pertaining to credit bureaus and credit providers. Some of the complaints are from consumers who are drowning in debt and struggling to make ends meet. The ombud, Nicky Lala-Mohan, says: “For many consumers, an additional loan seems to be their best option to get themselves out of financial stress. However, this leads to a debt spiral.” 

There are ways to save, despite your debt. Lala-Mohan has the following tips:

• Negotiate for better interest rates. It is important to understand exactly what interest rates you are paying and to negotiate for the best rates. A good credit record will help you to negotiate better rates.

• Draw up a budget and stick to it.

• Pay off some debt. This is a way of saving, because debt can be very expensive. The sooner you close some debt, the more you save on interest.

• Avoid using credit for day-to-day essentials. This is an indication that you are living beyond your means.

• Set up an emergency fund. Many consumers who do not have funds available for emergencies find themselves having to borrow, with the exorbitant charges this entails.


The Credit Ombud’s office conducted a survey last month in which it interviewed about 250 people between the ages of 18 and 30 in Gauteng. 

The respondents were asked the following questions:

1. Do you have debt? If so, what kind?

2. Do you have savings?

3. From what age did you apply for credit?

4. What was your reason for applying for credit?

5. What do you think credit bureaus do?

6. Do you think you are negatively listed (blacklisted)?

7. If yes, how did you find out about the negative listing?

8. How much do you spend monthly on data?

9. How much do you spend monthly on entertainment?

Many of the Millennials surveyed said “yes” when asked whether they had debt and “no” when asked whether they had savings. 

The survey found that they applied for credit from as young as 18 years of age. Their most common credit accounts were cellphone contracts, clothing accounts, credit cards, car finance and personal loans. However, few of the Millennials had home-loan debt.

Some of the common reasons given in the survey for obtaining credit were: “I wanna look good and have money.” “Because I was unemployed and I needed money.” “I was always broke because of overspending and family responsibilities.” “I wanted a nice car.” “I wanted clothing for special events and I did not have money.” “I wanted a credit card and a cellphone.” “For an emergency and I had no funds.” “To study.” “Loan and credit card to build a home in the Eastern Cape.”

Millennials spend on average between R500 and R2 000 a month on data and entertainment.

“Young people have different priorities when it comes to money, and saving is not part of those right now,” says Lala-Mohan.


Phimzile Musina (not her real name) approached the Credit Ombud for help. Phumzile, who is single, will retire from her job in the government sector next year. 

Although Phumzile earned a reasonable salary, she struggled to make ends meet, because she was the sole breadwinner in her family, which consisted of her parents and her adult son, all of whom had medical conditions. 

Within seven months, Phumzile took out five loans to the value of R76 000 with one credit provider. 

She was unable to meet her repayment obligations and soon found herself in trouble with the credit provider. 

On investigation, the Credit Ombud found that Phumzile was over-indebted and could not afford to repay the loans. 

The Credit Ombud’s view was that the credit provider should have given greater consideration to her expenses when conducting affordability assessments, as required by the National Credit Act. 

The actions of the credit provider were tantamount to reckless lending, the Credit Ombud said.

“We took up the issue with the credit provider and, together with her personal circumstances being taken into account, the credit provider agreed to write off the five loans, which, with interest and the other charges, stood at R140 554.63.”

The relief afforded to Phumzile is a example of how monthly payment obligations, which in her case amounted to about R5 000, can now be redirected to saving.

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