Are you a ‘money slave’ or a ‘money master’? Most of South Africa seems to fall into the first category, as both the government and ordinary citizens are burdened by debt and by not putting enough money aside.
This is worrying; a robust savings culture is crucial, not only for building personal wealth and independence, but also to ensure that there is enough capital for investment in the economy. So as you save and invest your money, you are becoming financially resilient while simultaneously helping to drive economic growth.
Nearly half of the population feels financially stressed, according to the 2019 Old Mutual Savings and Investment Monitor, with 38% feeling ‘high financial stress’ and 7% ‘overwhelmed’ by it. The last year has also seen a decrease in saving for emergencies as ‘affordability bites’, says the Monitor. ‘So buffer savings become a luxury. This leaves households very exposed, with 38% of metro working households only having enough savings to last a month or less if their main source of income was lost.’
Some South Africans do manage to save, with regular contributions to savings accounts, retirement annuities, stokvels, and a wide variety of other savings vehicles. But that is not nearly enough.
‘Our household saving rate stands at zero’, warns Adrian Saville, economics professor at the Gordon Institute of Business Science and CEO at Cannon Asset Managers. ‘For every rand that one household saves, another one is “dissaving” by buying a car on credit, or spending on a credit card. Clearly, the need is not for “some” or “a few” South Africans to change their spending behaviour, but for all.’
Get into the habit
The good news is that saving is a learnt behaviour. Money is a tool, so educate yourself by doing online research and asking the experts how to use it. Essentially, you decide whether to become a ‘money slave’ or a ‘money master’, according to Gerald Mwandiambira. As acting CEO and chief strategist for the South African Savings Institute (SASI), his goal is the development of a national savings culture. SASI’s successes include July Savings Month, an advocacy initiative that opens up discussions around the topic every year.
To become financially savvy, consumers need to understand that the way to prosperity is by saving, not spending. Over-reliance on credit and instant gratification are your enemies. Saving to invest, not to consume, requires self-discipline.
Mwandiambira argues that if people can choose to go into debt, they can also choose to save: ‘The only individuals who cannot save are those not getting any form of income.’ He said in a Moneyweb interview that saving and investing require sacrifice (giving up what you enjoy today), commitment (keeping your eyes on the goal) and discipline (putting money aside every month, over years).
Don’t despair if your finances are a mess. Analyse your position, ideally with the help of a financial adviser, then pay off high-interest debt, and set realistic financial goals. Start now to save for holidays, property, retirement or your child’s education.
Time is crucial for successful investing. The sooner you start, the more your savings will grow through the power of compound interest. Even if your total savings goal seems massive today, don’t be intimidated or give up the idea of saving altogether. Instead, save as much as you can afford at this moment, then increase it later. Saville says: ‘No matter how small your first investment, the only way to change behaviour is to take a first step.’
The ever-growing fintech offering enables you to manage your money on the go, through mobile day-to-day banking apps, online savings calculators for big-ticket items or debt repayment, and tools for financial planning. Tech also helps you to prioritise savings, for instance through scheduling monthly payments from your primary bank account to a savings account.
Some banks offer the option of automatically sending a percentage of your income into a savings pocket for investment. This falls under ‘behavioural banking’, nudging consumers towards better fiscal habits. If this works for you, visual goal-setting, social media ‘chatter’, or your bank’s rewards system could motivate you to save strategically, setting you on the path to becoming a money master, not a slave.