Why SA needs to build a stronger savings culture

Bruce Fleming, CFP® and 2016 FPI Financial Planner of the Year.

According to the 2016 Global Consumer Survey (GCS) issued by the Financial Planning Institute of Southern Africa (FPI), only 27% of South Africans believe that they are knowledgeable about finance and financial matters. However, 74% of South Africans consider building a savings plan to be a top priority. This highlights how strong the barriers that are preventing consumers from saving really are.

Debt is one of the biggest problems facing South Africans today. The 2015 World Bank report found that 86% of South Africans borrowed money in that past year; this is one of the highest rates to date. Consumers are not putting enough time and energy into planning their finances, whether it’s budgeting or spending time with a CERTIFIED FINANCIAL PLANNER® professional who can teach them how to accurately save. This is combined with a lack of financial education, “As we begin the month of July, known as Saving’s Month, FPI, together with other financial institutions, need to stay committed in providing consumers with the best suitable advice when it comes to their finances. This is essential to improving the savings culture among South Africans”, said Bruce Fleming, CFP® and 2016 FPI Financial Planner of the Year.

Saving comes in many different forms; whether it is a savings account in the bank, buying shares and investing, or contributing to a retirement annuity. Fleming adds that “it also means consumers must adjust their lifestyles so that they can incorporate a portion of their income into a savings scheme”.

Although it is never too late to start saving, there are many reasons why it is vital to start soonest. On the most basic level, saving enough ensures that people have food and shelter for their families, it also means that they can retire comfortably. According to the South African National Treasury only 6% of South Africans will be able to maintain their standard of living after retirement. People who start saving as soon as they start earning an income have the biggest advantage, as regular savers benefit the most from compound interest.

According to the Investec GIBS Savings Index there are at least three ways that South Africans can escape the ‘savings trap’ – by reducing consumption to boost savings, attracting off-shore investments to promote portfolio investment and attracting off-shore direct investment.

The South African Savings Institute (SASI) has declared July as national Savings Month in order to combat South Africa’s unhealthy savings culture. The key objectives of this campaign are to promote debates around key aspects of saving, raise awareness around different forms of saving and getting consumers to be more proactive when it comes to saving.

“Savings Month’s primary focus is on educating consumers about the need to save and how this ties into their overall financial wellbeing. Furthermore teaching consumers about the risks of not saving, the benefits of saving, and how to save effectively will hopefully bring change in their views of money and create a new generation of financially savvy citizens,” concludes Fleming.