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Save and invest today and own tomorrow

17 July 2014 Leon Campher, ASISA
Leon Campher, CEO of ASISA.

Leon Campher, CEO of ASISA.

Despite numerous initiatives aimed at encouraging South Africans to save, consumers still fail to save enough during their working years to enable them to maintain their living standards during retirement.

Leon Campher, CEO of the Association for Savings and Investment South Africa (ASISA), blames this on an inability by South Africans to distinguish between needs and wants, which has created a culture of excessive conspicuous consumption.

“South African consumers tend to prioritise the financing of their wants like new cars, the latest electronic devices and fashion items. Only once the need to consume has been satisfied, is any thought given to real needs such as saving, investing and protecting yourself and your family against risks such as death and disability.”

This is confirmed by the low household savings rate, concerning levels of over-indebtedness of South African households (currently at 74.5% of a year’s income, according to SARB) and an insurance gap (the difference between existing life and disability cover and the actual insurance need of South African earners) that widened to a staggering R24 trillion in 2013.

Campher says while Government together with the private sector is working on solutions aimed at increasing household income through job creation, consumers also need to adopt a culture of saving and investing rather than spending their hard earned money and splurging on credit.

“By not saving today, South Africans are compromising their ability to fund something meaningful at a later stage, like a child’s education or providing for a comfortable retirement.”

Campher says consumers are generally advised to start changing their spending habits by preparing a budget. But, he adds, instead of using the budgeting exercise to reduce spending and to free up money for repaying debt and then saving, many consumers view the budget as a target. “The fact that you have budgeted for an expense does not make it a necessity. A budget should not become your spending target.”

Campher points out that the immediate benefit of saving money is your own financial security. However, he adds, a strong household savings rate is also crucial in building a strong economy, job creation, and ultimately lower interest rates and inflation.

“Savings help consumers to fund their personal future financial commitments without having to go into debt. Investments made by individuals are also the source of capital channelled by financial institutions into growth opportunities such as infrastructure and manufacturing development.”

Promoting a savings culture is therefore not only important to ensure the financial well being of South Africans in the long-term, but it is also essential for the country’s development as a whole, he says.

Campher says for this reason ASISA supports the South African Savings Institute (SASI) in its initiatives to create a greater awareness among South Africans of the importance of saving.

“Collectively, our aim is to encourage South Africans to save today and own tomorrow,” he emphasises.

Campher acknowledges that people need to have jobs and earn an income before they can be expected to save. In addition consumers also need to be given access to savings products that meet their needs. ASISA has therefore prioritised work on the following key deliverables for 2014:

• Creating savings solutions for South Africa’s most vulnerable people, namely those with low and erratic income streams such as farm workers and domestic workers. ASISA is exploring options in partnership with Organised Labour and National Treasury.
• To find ways for private sector capital to effectively participate in the financing of social and economic infrastructure. While there is significant appetite in the private sector to invest in infrastructure, ASISA would also like to make it possible for retail investors to invest directly in products designed to fund infrastructure development.
• Foster the future through skills development by the ASISA Academy, consumer financial literacy by the ASISA Foundation, and enterprise and supplier development by the ASISA Enterprise Development Fund.

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