Johannesburg – Saving is largely dependent on willpower and discipline, according to the South African Savings Institute (SASI).
Chairperson Prem Govender explained that South Africans have to improve their attitude to saving, given the credit ratings downgrade and the low growth economic environment.
“Many South Africans are struggling to save not only due to income challenges, but also the lack of willpower and commitment,” said Govender.
Data from the South African Reserve Bank (SARB) shows that in the past 16 years there has been a decline in the savings rate, explained Govender. It reached as low as -2.70% in 2013. The savings rate increased from -0.50% in the last quarter of 2016 to -0.30% in the first quarter of 2017.
This has been accompanied by a reduction in household debt. Data from SARB shows on an annual basis, the growth in household debt slowed from 4.6% in 2015 to 3.9% in 2016. Further, the ratio of household debt to income was lower from 76.9% to 74.4%, said Govender.
SASI provided a number of alternative savings methods. These include:
1. Set a target
Many people don’t save because they don’t set targets. Set and write down important savings targets such as an emergency fund, holiday fund and other savings targets.
2. Automated savings
Debit orders to savings accounts. Set up debit orders for Tax Free Savings Accounts (TFSA), 32-day notice accounts and unit trust accounts.
3. 13th cheque
Ask your employer payroll to save for a 13th cheque to be paid to you in December, by lowering your salary. “This extra pay cheque will allow you to ride out the festive period and new year expenses without major impact on your finances,” said SASI.
4. Pension fund contributions
When starting a new job, ask your employer to default to the highest allowable retirement fund contribution percentage of your income, explained SASI. You can also ask your employer to review your current contribution. All retirement funding contributions are tax deductible annually up to R350 000.
5. Financial wellness days
Ask for mandatory time off to review your finances with a financial planner once a year. “Regular meetings with a certified financial planning professional will help you remain in control of your finances.”
6. Group savings
Start or join a Stokvel or investment club with family and friends. “The group will encourage you and allow you to develop the discipline required to be a regular saver,” said SASI.
7. Savings buddy
Get a savings buddy to meet with regularly to discuss your savings journey and hold each other accountable.
8. Baby gifts
Request cash for a baby gift, to be deposited into a TFSA. “Or even taking out a retirement annuity (RA) for a baby,” said SASI.
Open TFSAs for all your children. Set up debit orders to contribute to these accounts as they grow up, together with cash gifts they receive on birthdays and other events. “You can encourage grandparents and other family to also contribute regularly.”
10. Domestic help
Set up a savings account or retirement annuity for your domestic helper.
11. Retirement fund statement
By receiving your retirement fund statements monthly or quarterly, this can help you keep track of your savings to make sure you have sufficient income for retirement.
12. Financial products and insurance
“Shop around and use a financial institution that rewards consistent savers either through a high savings interest rate or cash back for no claims,” said SASI.
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