Developing a culture of saving amongst the youth

June is National Youth Month and July is National Savings Month. It’s a good time to focus o­n creating the right attitude and encouraging the appropriate behaviour in young people so that they will be empowered to manage their finances effectively.

The recently released Old Mutual Savings Monitor indicates that 31% more people in the 18-24 age group are saving than last year, but that South Africans in general aren’t saving enough. Included in this group are young people, who’re missing out o­n a critical window of opportunity for saving.

It’s no secret that the prevailing consumer culture, the media and advertising have an enormous influence o­n how people - and in particular the youth - spend their money. This is compounded by peer pressure, which affects impressionable youths more than adults.

“It’s all about attitude and habits and setting positive examples,” says Iain Williamson, Managing Director of Retail Affluent at Old Mutual.

Peer pressure is normally thought of as something negative, but if those individuals in a group who have the most influence set a positive example by starting to save money o­n a regular basis the rest of the group will follow. “Saving money is cool” may well become their motto.

“By changing your attitudes, thinking and habits around money, you can achieve prosperity,” says Williamson.

“Most people intuitively understand that they need to save ‘a little bit’ at the end of the month. But this often doesn’t work, as there always seem to be other expenses that eat into whatever is available.

“Failing to get into the habit of saving regularly is o­ne of the biggest reasons why people don’t become financially secure,” says Williamson.

This has a domino effect leading people to become dependent o­n the state in their old age. But governments all over the world are increasingly under pressure to settle national debts. This has a negative impact o­n their ability to sustain social welfare payments in the long term. South Africa is no exception. Almost 14 million people are already receiving some sort of state aid, but how sustainable is this for the state in the long run?

Williamson believes that even if you start with a small savings amount monthly, you will develop a savings habit. This habit will make it easier to increase your savings over time.

He says it helps to ensure this saving is automatically deducted from your monthly income, before you start paying other expenses. By paying ”savings” at the beginning of the month, it makes the money unavailable for spending.

“Eventually you will forget about your saving and not even miss the money. Psychologically it should just become another ‘fixed expense’ in your budget.

“If your savings are not automatic and you have to put the money aside yourself, you will soon find reasons for not doing it immediately, or ever, which will bring your savings plan to a halt.”
By implementing o­ne of the following methods to make savings automatic you will be o­n your way to disciplined saving:

•Young people receiving pocket money from their parents should ask them to hold back a portion at the beginning of the month that should go automatically into a savings account.
•Ask your employer to deduct the money from your salary and pay it into your savings account or investment each month.
•Ask your bank to arrange a stop order against your account.
•Sign a debit order in favour of the investment manager in case of a unit trust fund that ensures higher returns above inflation and more than what an ordinary bank savings account would give you.

“It is very difficult not to get caught up in the consumerism and desires of our society, but having solid money management skills will help you keep yourself afloat. This is not a problem that will go away overnight for our country, but as individuals we do have control over the financial choices we make,” concludes Williamson.