The modern approach to lobola savings

According to the latest Marriages and Divorce data from Stats SA[1], there has been a 13.2% increase in customary marriages between 2014 and 2015.

What’s in the news?

Customary weddings can be expensive, and many South Africans have to consider the additional cost of lobola.

How can South Africans save for lobola?

The amount of lobola depends on several factors, such as the level of education of the bride-to-be, the number of children she would like as well as her culinary ability. The general rate of exchange is a minimum of 10 cows (which equates to about R9 000 per animal) or its cash equivalent.

Before deciding which savings vehicle to use, it is useful to consider how much time the groom has until negotiations – and approximately how much is needed. This will guide you on how much risk versus return you should look for. Possible examples of lobola savings vehicles are:

• A tax-free savings account: While contributing to this account, you do not need to pay any tax on the dividends or interest earned by your investment. However you can only invest up to R33 000 per tax year in this vehicle.
• Money market account: You can deposit cash directly into this account, but the returns depend solely on the interest rate.
• Unit trust fund: If you’re looking to invest more than R33 000 in a tax year, then this is a good option and the funds are easily accessible.
• A stokvel: Each contributor to the stokvel has a turn to receive a lump sum of money.

How does lobola impact South Africans?

Unless new couples plan for lobola costs, they may find themselves in debt and having to take out loans or use credit cards. Despite the recent cut in interest rates, debt remains expensive and it is important to think ahead, budget carefully and avoid taking on extra debt where possible.

On a personal note…

Communicate clearly with your partner in terms of your financial plan and how much you are able and willing to spend on lobola, and also have a discussion on how you will plan and manage your finances together after the wedding. Working with a financial adviser to build all your savings objectives into your broader financial plan will ensure that you choose the correct savings products and are prepared for the future. .