Liberty, helping South Africans Stash their cash for a better tomorrow

"Do not let the economy discourage you from reaching your savings goals."

As South Africans contend with the ever-escalating cost of living, and the real pinch many feel from having ‘more month left than money’ – creating a savings culture may seem counter-intuitive against mounting needs, however, it may be what saves households in the long run. This is according to finance and economic experts who held a robust Twitter Spaces conversation, hosted by Liberty Group, which unpacked how people can develop a savings and investments culture for themselves.
While the current economy paints a bleak picture as interest rates, fuel prices and basic food prices are hiked to unprecedented levels, locals can still take control of their financial picture and future.

“2022 was supposed to be the year that we recover from Covid-19 regulations and the impact of lockdowns. Instead, the Russian war on Ukraine has turned the world upside down, causing food and energy supply shortages and global inflation. On a more local front, nobody could have anticipated the disastrous floods that hit the Kwazulu-Natal province where most of our local import and export activity goes through,” Consumer Economist, Zandi Makhoba, said. “Thinking about the future, and how to handle the inflation challenges, it’s going to be so much more important to have something saved away, something ‘stashed away’ to buffer against these increases we are experiencing.” Glenn Grimley, Head of Stash at Liberty, said that prior to introducing the Group’s tax-free investment, accessed through the Stash App, they had conducted research to understand what the barriers to entry were in the local market. The Stash App is flexible and helps you save small amounts of money every day, tax-free, and by connecting your bank card, you can automatically save as little as R5 per day. One can also stash at any time with the press of a button.

“As Liberty Group, we thought, ‘how can we change the savings culture and actually make a difference in the lives of South Africans. We came up with Stash which addresses three key barriers to savings and investment entry. The first being: the low levels of financial literacy, which leads to low levels of confidence (in financial decision making). So, bringing in something that was really simple and didn’t need massive knowledge about financial systems was something we wanted to create.”
He continued, “The other two barriers we wanted to break included this misconception that in order to save you needed to have a lot of money, or some sort of commitment to your savings, and the time and effort required to set up an account. But people’s realities are that they can’t just put R1 000 away every month, balance sheets and income statements are stretched. We wanted to make it easy and ensure that one didn't have to commit to a pre-defined amount every month. We also wanted to take away all the paperwork and pain out of the system, so that people can get in easily, and that once in, they can manage their savings and investments according to their lived experiences and giving them control over their savings in real-time.”

Since the beginning of March 2020, Stash has grown from 80 000 accounts to over 230 000 today – representing 190% growth. Further, its monthly cash inflows have increased from R3.5 million per month to now over R35 million per month.
“Obviously some people Stash more than others, but the average amount Stashed per month is around R420, which is just under R15 per day. Unfortunately, though, we have seen the pinch starting to hit this year, with higher inflation, higher unemployment for instance, and as a result we have also seen a significant increase in monthly withdrawals,” Grimley stated.

“Pre-Covid-19 we had a withdrawal rate of 8% of customers withdrawing some or all of their Stash investments per month. This has increased in 2022 to be around 12%. The important thing to note however, is that most Stashers, when they withdraw, don’t close their Stash account, and immediately start to build their Stash balance for their next savings goal or emergency fund.”According to Behavioural Scientist, Adam Gottlich, it’s just as important to understand what stops locals from creating a savings culture as it is to understand what it will take to foster it.

“Saving is really difficult, and it’s difficult because it’s an extension of willpower. Willpower from a behavioural science perspective is something we know is a limited cognitive resource. It means that actually saving is difficult and from a willpower perspective it means that we have to exert a lot of our cognitive effort, time, and energy to accomplish this task,” he said. Makhoba advised anyone wanting to begin saving monthly to begin where they are, and with what they have. “One of the beauties of starting small, is you don’t need huge amounts to be able to make a difference. When looking at your own expenditure balance sheet, start looking at leakages; are there things you have such as subscriptions that aren’t really benefitting you and you can easily cut off and start stashing those amounts towards a savings habit?”

Makhoba listed these additional areas to reconsider in order to start saving:
• Lowering gym memberships and other subscriptions to lower gradings.
• Using reward cards when swiping in stores and using that money to stash into savings; and
• Creating lift clubs with people living around you traveling the same way to work.