When it’s not the increasing petrol price, consumers’ finances are stretched between balancing high electricity tariff hikes and paying off debt. This, according to Gerald Mwandiambira, acting chief executive of the South African Saving Institute (Sasi), leaves not enough money to save for a rainy day.
July is Savings Month and Mwandiambira says South Africans should use the month to work on beefing up or starting a savings fund.
Mwandiambira says: “In terms of savings, South Africans are not saving enough because of a high level of domestic indebtedness. On average most households spend more than 70% of their household income servicing existing debt. This, obviously, has an impact on saving and leaves less disposable income for the purpose of saving.”
He says consumers have a misconception that they need to finish paying off their debt before saving, a thing that might bite them in the back, especially with the current wave of retrenchments and unemployment.
“Because people are spending more on debt, they think they have less to save. Saving should be something that happens all the time, especially at a time like this when the economy is a challenge. People are getting retrenched.
“Now imagine being retrenched and having no savings? You’ll be worse off than someone who saved a little.
“People must stop this viewpoint that they’ll start saving after paying off their debt. Rather pay off the debt while starting to save, and once the debt is gone, save even more,” Mwandiambira advised.
Sasi chairperson Prem Govender said: “The young tend to save less and spend more. With 20 million people aged between 15 and 34, South Africa has a young population that are increasingly relying on credit.
“We can blame issues such as black tax, high unemployment, a rising tax burden and inflation - but we also must fundamentally stop living beyond our means and drive a savings culture to break the cycle of inter- generational debt.”
As part of Savings Month, Mwandiambira says Sasi is challenging South Africans, especially young people, to think differently about how they save.
Under the theme #crazywaytosave, consumers are encouraged to share their creative ways of saving on social media.
“Social media is the domain where young people spend time, it’s a way of getting them to see how other people save,” Mwandiambira says.