Why people are not saving

Cape Town - Although the statistics differ on how many people are currently saving in South Africa, the alarming fact is that a substantial chunk of the population is not saving at all.

For example, research conducted by FNB Savings & Investments has found that 73% of the banked population in South Africa is currently saving, while a recent survey done under Fin24 users, found that only 55% of readers are saving money for the future.

These survey results are in no way claiming to be indicative of the state of savings in South Africa, but the responses to the surveys gave significant insight into why people are not saving.

So why are they not saving?

The first reason might relate to income. Are non-savers earning significantly less than their saving counterparts and thus do not have the financial ability to save? 

Research conducted by FNB Savings & Investments has found 88% of non-savers earn below R100k per year.

However, the bulk of savers in SA - nearly 70% - also earn below R100 000 per year.  The issue is thus not how much non-savers are earning, but what they are doing with the money they earn.

"Our research has found that the number one reason given by non-savers as to why they do not save is the high cost of living”, said Lezanne Human, CEO of FNB Savings & Investments. 

Non-savers could easily find reasons to justify why now is not the right time to save – high inflation, the impact of possible further interest rate hikes on debt servicing costs, high levels of debt and many more.

The research also showed that nearly one in two non-savers believe they still have plenty of time to save later in life, whilst savers display a greater level of urgency.

“Savers are faced with similar increased living expenses, yet still manage to save.  The bottom line is that the best time for starting to save is always the present.  Delaying savings will only make it more difficult to start in the future and, worst of all, by procrastinating you might not have sufficient time to reach your savings goals,” said Human. 

Another reason why savers are able to save may be because they don’t have high levels of debt, but the   FNB research showed that 54% of savers are currently paying off sizeable debt. This is significant in that it shows savers are also exposed to debt and, should interest rates increase, they will also face rising debt servicing costs.

A key difference between savers and non-savers are however that savers believe in the value of small saving.  

According to FNB Research one in every two savers agree that it is worthwhile to save small amounts like R10, whilst only one in three non-savers see the value in saving similar amounts. 

“This allows savers to still manage to save, despite increasing pressure on their disposable income,” said Human. 

“Through continuing their savings and not stopping, savers benefit from earning interest on interest which in turn boosts their savings.  This is despite putting away relatively small amounts,” she said.

- Fin24

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