South Africa doesn't have a genuine savings culture yet - and ongoing education is needed to build it, says Nkazi Sokhulu, co-founder and CEO of credit life insurance brand Yalu.
Credit life insurance covers consumers in the event that they cannot pay their creditors under certain circumstances. The Credit Ombud defines credit life insurance as "the insurance cover a consumer takes out in the event of their death, disability, terminal illness, unemployment or other insurable risk that is likely to impair the consumer's ability to earn an income or pay their monthly installments under a credit agreement".
"Consumers should know what other, cheaper alternatives exist, but it's equally important that they understand the terms and conditions of their existing agreements, and that they are equipped to demand that their current service providers stick to the legal terms of their contracts," Sokhulu explains.
"Education about consumer rights and the hidden details of financial products is key to growing a South African society that understands how, when and why to save."
Sokhulu says there is a clear link between the implementation of the National Credit Act (NCA) in South Africa's financial services sector in 2006 and the country's overall ability to create a sustainable savings culture.
One of the most important functions of the act is to create a level playing field between brands and consumers. It achieves this by forcing companies to meet clear communication and information transparency standards.
"Companies are required by the NCA to ensure that they communicate clearly and simply with consumers," explains Sokhulu.
"In theory, this stops service providers from hiding contract details within the fine print, or from talking in a generally confusing way about a product or service."
According to Sokhulu, many borrowers don't know much about their credit life insurance policies, including the fact that they have the right to choose their own provider. The fees charged for such policies can vary dramatically, and as a result a lot of consumers unwittingly pay the maximum possible premium every month.