KEEP UP TO DATE WITH ALL THE IMPORTANT COVID-19 INFORMATIONCOVID-19 RESOURCE PORTAL

FANews
FANews
RELATED CATEGORIES
SUB CATEGORIES All | 

Tapping into your community to save more

13 October 2021 Metropolitan

South Africans are known for being poor savers. Trading Economics, which provides economic indicators and data, projects that in 2022, the South African household saving ratio - which refers to the income saved by household during a certain period of time - will sit at only 0.60%.

Why are South Africans not good at saving? “South Africans believe that they do not have enough money to save”, says Witness Ntshikilana, Provincial General Manager at Metropolitan.

“While we do face a significant number of financial pressures as well as cultural expectations, such as ‘black tax’ - which add to our expenses, I believe that the biggest contributor to our poor savings rate is a lack of financial education, which means that saving is not prioritised.

“Perhaps as a result of our difficult past, many South Africans believe that it is important to be seen as leading an aspirational lifestyle. While it is important to have financial goals and dreams, the danger comes when material items and expensive experiences are purchased with money that one does not have, which creates a debt trap,” he says.

COVID’s saving silver lining
Yet it appears that the COVID-19 pandemic may have an unexpected silver lining, in making South Africans more aware of the importance of saving. According to statistics from the South African Reserve Bank (SARB), South Africa’s national savings rate - which is gross domestic product (GDP) that is saved rather than spent in an economy - increased significantly; from 14.2% in the fourth quarter of 2020, to 18.0% in the first quarter of 2021.

But there is still a long way to go, according to Ntshikilana, to ensure that we have an adequate ‘financial buffer’ should we find ourselves facing a future crisis or unforeseen event.

He says: “As this is a hurdle we collectively face as South Africans, it makes sense that we need to harness the power of the collective – our communities and those around us – to start changing our saving habits for the better.”

Community saving
Stokvels and burial societies are popular informal savings vehicles within South African communities. “Stokvels allow you to leverage the power of collective saving, with members contributing fixed sums of money either weekly or monthly for a specific purpose, such as groceries or debt repayment. The group then decides how and when the money is distributed”, he explains.

“These are generally a good option for short to medium term financial goals, such as food or entertainment for family visiting over the festive season, for example. Burial societies are based on a similar model, except that the pay-out is made in the event of death.”

He says that the advantage of these types of saving vehicles are their community-centric nature, and the sense of belonging and support they offer to members. “If you decided to get fit, it is easier to commit to exercising if you have a friend joining you for a run. Stokvels work similarly - by being part of a group dynamic, it helps keep you accountable to the group’s saving targets.”

The role of the community in your personal savings
Ntshikilana says that while community savings pools are ideal for shorter term needs, you shouldn’t neglect your personal financial goals, which will allow you to build wealth over time. This is where ‘formal’ savings vehicles, such as savings accounts or plans, come into play.

“While these plans are typically engaged by you, as an individual, it is still possible to leverage the power of your community to determine which option is best for you, and to help motivate you to save. There are those in your life who are willing to guide you in getting to where you want to be,” he says.

He suggests talking to someone in your community whom you trust, and who is knowledgeable. “Approach a family member, counsellor, traditional leader or someone with financial know-how, such as a Metropolitan financial adviser, and tap into their expertise and experience.”

Ntshikilana says that those within your community can help you make the best choice based on your own personal goals and individual circumstances, as there are many savings options out there.

The Metropolitan Savings Plan, for example, combines a money market savings plan with a tax-free savings plan, meaning that the policy holder is able to access a portion of their savings in the event of an emergency, while the funds in the long-term tax-free savings component remain untouched, allowing them to grow over time.

Regardless of whichever option you choose, Ntshikilana says that it is important to take that first step and start saving – as well as encourage those around us to do the same. “We need to create a culture of saving in our communities, and it starts with us.

“If we can improve our financial health while encouraging those around us to save, our community will thrive – and ultimately, so will our country,” he concludes.

Quick Polls

QUESTION

Do you believe this is the toughest period for financial advice in many years?

ANSWER

Yes, it’s hard to navigate the challenges and difficult to adapt. I’m struggling.
No, I have managed to navigate the challenges and have adapted. I’m good.
50/50. I just feel like whether we like it or not, we have to ready ourselves for change… be resilient and scale for the future. It’s not about survival of the fittest anymore but survival of the quickest. We just have to move on with life.
fanews magazine
FAnews October 2021 Get the latest issue of FAnews

This month's headlines

IFA nuggets: Prospecting for clients
FSCA weighs in as universal life policy premiums rocket
No short cuts for the short term broker
Investment lessons worth sharing
Tightening of policy wordings… likely in the future?
Subscribe now