Latest price hikes to hit household savings rate

Struggling consumers can expect to be hit hard in the next few months by a hike in the petrol price, which over the last two months has increased just short of one rand, the implementation of e-tolling, an electricity tariff increase of 16% and higher Met

Van Deventer says that the increase in transport and electricity costs and the consequent knock-on effect this will have on the price of most goods and services are especially worrying in light of South Africa’s low savings rate. “South Africa already has an extremely low savings rate, with savings that constitute only 20% of the country’s GDP. When compared to other emerging economies such as China and Malaysia, South Africa scores extremely low on domestic savings levels.

“In addition, it is estimated that a frightening 94% of working South Africans do not save enough for retirement and therefore will face financial difficulties in their golden years.”

He says that on top of the day-to-day savings, working consumers should be saving about 15% of their salaries towards retirement. “This is becoming increasingly difficult to do with the high cost of living.”

He says that consumers will need to take extra precaution to ensure that they have set budgets in place and stick to a financial plan when it comes to savings strategies. “Effective planning will ensure that consumers can retire comfortably and afford necessities such as housing, food, medical expenses and even college or university fees for their children.”

Van Deventer advises that consumers tighten their belts and make use of financial planning and budgeting in light of these increased every day costs. “An effective budgeting method is to analyse monthly variable expenses such as petrol, clothing, groceries, cash withdrawals and rest and recreation items, as these items make the most difference to wealth building strategies. These expenses need to be separated into need-driven and want-driven costs, which consumers should be able to cut down on. By cutting down radically on want-driven expenses consumers can effectively find additional funds for savings purposes. As a guideline, total savings should come to about 20% of net salary.”