South Africans need a mind-shift to start a culture of savings

“South Africans have a bad track record of saving which puts them at great risk should anything unexpected happen, such as losing a job, this also means that there is nothing put away for retirement one day,” says Eunice Sibiya, head of Consumer Education at FNB.

Sibiya suggests that South Africans need a mind-shift, away from a culture of spending and debt, to one of responsibility and savings.

“The key to saving is having financial plans and goals, you are the only one with control over your own finances” says Sibiya. “You need to know what your short, medium and long term financial goals are. And you can work these out by drawing up a budget and sticking to it.”

A short-term goal is one that comes up in the next couple of months up to 2 years, such as buying a pair of shoes, furniture or planning a holiday. A medium term goal is one which needs more consideration and a longer period to save, such as deposit on a house, car or saving for your children’s education. A long term goal is the most important, such as your future retirement and you need to ensure you are putting away sufficient amount of money so that you are able to retire comfortably at an older age.

“It is not about the salary that is earned every month, but how that money is used to better your financial position,” adds Sibiya.

Budgeting is essential for day-to-day living, but also important for saving. Sibiya says that one should budget to save, in other words, include a portion of your salary every month as an item on your budget to put away, rather than waiting until the end of the month to see what is left over.

“Include a savings amount in your budget and ensure it is transferred into your savings or investment account. An easy way to do this is to transfer the money yourself, or set up a debit order. Make it one of the debits orders that go off close to your payday. This way, you’re guaranteed of putting something away for your savings every month,” continued Sibiya.

Importantly, savings need to be placed in a savings product, such as an appropriate savings or investment account or savings pockets with no monthly account fees where it is safe and earns interest. There are many good savings products in South Africa, which can be used by individuals or groups saving together. The type of product you choose depends on your specific goal, how long you want to save and how much risk you want to take, so it is important to visit your bank or registered financial advisor to get advice on which savings product is best for you.

“Don’t be tempted to keep your savings in cash,” says Sibiya. “Because of the nature of inflation, the cash that you put away will not keep up with inflation, meaning that it will not be worth as much in the future.” For example if you keep money in cash your R100 savings today will still only be R100 next year, however a the cost of bread today versus next year will increase, which means the value of your cash savings reduces every year. Not only will the value of your money reduce but cash can be stolen easily.

Another way to save money is to watch your monthly spending and identify areas where you can cut down, or try not to buy non-essential and unplanned items such as expensive shoes or dinners.

“You don’t have to cut these out completely, rather plan smarter,” says Sibiya.

She suggests including these in your budget and saving towards them, instead of impulsively spending money.

Sibiya says that parents should teach their children to save from an early age.

“It’s good for you because it will give you peace of mind, and even better for your children because knowing how to save is a life skill. Encourage them to work for their pocket money. Help them learn that making a financial decision is about weighing the value of one thing against another and choosing which one to forego in favour of the other ??? needs versus wants. Open saving accounts for them as early as possible and help them start their future on the right footing,” says Sibiya.

“The best thing you can do is to start saving consistently and conscientiously from the day you get your first job. Put aside some of your income every month in a safe investment, and this will go a long way for your future. Be financially smart,” concludes Sibiya.