If South Africans want to achieve considerable financial stability, which could cushion them from interest hikes, the rising cost of living and economic disruptions they will need to increase on saving attempts.
The Momentum Consumer Financial Vulnerability Index Research Report, conducted in 2023 shows that consumers are sacrificing their savings in order to pay off their debts due to the rising interest rates. According to the report, 71.7% of consumers expressed unhappiness, stress and negative emotions when thinking about their finances, while 73.7% stated that consumers were constantly thinking about their finances. The FSCA’s 2020 Financial Literacy Baseline Survey further shows that 23% of employed South Africans only put money into their savings accounts, while more than 44% did not save in the previous year. The survey goes on to say that about 15% of people kept their money informally at home rather than going to the bank, while 17% of respondents said they saved money in bank accounts.
In addition to the above, the latest statistics from Business Tech released in May show that, in a global context, our country will continue to have a lower savings rate (0.5%) than other emerging markets in Asia, Latin America and Eastern Europe, in 2023.
The bleak picture painted above is compounded by the current state of the South African economy and the increasing interest rates that have forced people to adjust their lifestyles in a short period of time. This further jeopardizes our already fragile savings culture and calls for serious financial education to address the norms embedded in society that focuses on spending today rather than saving for tomorrow. This clearly shows that people prefer to spend rather than save as they enjoy buying even when there is no need. Saving remains an art that few people have mastered.
The Financial Sector Conduct of Authority (FSCA)is encouraging South Africans to keep saving despite the country's current economic difficulties. According to Mr. Lyndwill Clarke, Departmental Head of Consumer Education at the FSCA, the culture of saving starts with saving what little we already have and postponing immediate gratification in favour of the long-term benefits.
"It is not only the rich that can save. Saving should start with the little you have, and you can always save more as you earn more. Saving is something you should do regardless of the economic situation because it helps you get through rainy days," he explains.
“We saw what happened when the pandemic hit the world and people either lost their income or had their income stream reduced as businesses implement layoffs and some were even forced to close. Those who had a normal savings culture survived the crisis, but those who lived hand-to-mouth went deeper into debt”, adds Clarke.
Saving, however, should not only apply to rainy days, but also to your future financial planning. It’s important to build financial independence at an early stage of your life as making saving a habit will benefit you in many areas of your life.
A saver can achieve their set goals that would otherwise be impossible given a limited income. Making saving a habit can help build a secure future, reduce financial stress, and achieve long-term financial freedom and prosperity.
Free resources available to the public
The FSCA has produced several consumer financial education (CFE) resources, with a focus on simplicity. This information is intended to empower consumers to make better informed decisions around finances which leads to living a financially well life - and it’s distributed at no cost.
Visit www.fscamymoney.co.za for an electronic copy or email info@CED.Consumer@fsca.co.za for general enquiries and requests for financial literacy presentations/workshops.
For permission to use the FSCA’s financial literacy information kindly email Alicia.Moses@fsca.co.za.
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