The 2017 SASI (South African Savings Institute) July Savings Month was launched today in Sandton by Orlano Makubela, Chief Director of Financial Investments and Savings at National Treasury, and Sazini Mojapelo, Group Head of Citizenship at Barclays Africa, with a focus on encouraging alternative savings solutions. A panel of industry experts discussed developing alternative mechanisms to help South African consumers, already under pressure and over-indebted, to save.
Absa partnered with the South African Savings Institute (SASI) to launch National Savings Month, joining anchor sponsor the IDC and other long term partners across the financial services industry. Mojapelo says, “Our decision to partner with the South African Savings Institute echoes our commitment to Shared Growth through which we use our resources, the talents of our people and our expertise to make a positive difference in society. One of our commitments in this regard is Financial Inclusion, which includes financial literacy training, and looks to encourage South Africans to recognise the importance of saving and to save.”
SASI Chairperson, Prem Govender, says that following South Africa’s ratings downgrade and subsequent effects on the economy, consumers will increasingly be under financial pressure and need to improve both knowledge and attitudes to saving. “Savings Month has been designed to remind consumers, via the media and other channels, to strive towards financial freedom or remain continuously vulnerable. Cultivating a culture of savings and promoting alternative savings solutions in all spheres of life is our focus for 2017.”
SASI believes employers can also play an important role. “Many South Africans are struggling to save not only due to income challenges, but also the lack of willpower and commitment. In terms of alternative savings solutions, we are involving employers this year and suggesting ways to facilitate or automate the savings process for those with an income, such as garnish savings options into a tax free saving account and 13th cheques structured as a savings tool.”
Gerald Mwandiambira, SASI acting CEO, emphasized the importance of people having a savings buffer in tough economic times. “Research shows that savers with a buffer enjoy improved emotional wellbeing, greater resilience to external market shocks and, importantly, an increase in productivity at work. We need employers to get involved in the savings process by assisting with automated savings programmes, especially considering that financially stable employees make productive employees.”
Mojapelo agreed, saying, “Persistent unemployment and the rising costs of living, made worse by historical spatial development patterns, means the average lower income household faces far greater pressures than many of us imagine. For those that can save, it is important that they use all the instruments available to improve their long-term financial sustainability. The responsibility for enacting these critical behavioral changes is a shared one, and we see a role for individuals, financial services providers but also for employers and HR professionals. Employers have a significant role to play in guiding their employees to make those small behavioral changes. HR professionals should be recommending tweaks to employees such as regularly reviewing and adjusting their pension fund contributions. They should also be educating employees to start building a savings buffer in case things go wrong.”
SASI has been dedicated to developing a robust culture of saving in South Africa since 2001. Govender says, “According to South African Reserve Bank (SARB) figures, in the last 16 years we have seen a decline in our savings rate, reaching a record low of -2.70 in 2013. However, we are now seeing small increases off a very low base, with the Household Saving Rate in South Africa increasing to -0.30 percent in the first quarter of 2017 from -0.50 percent in the fourth quarter of 2016.”
Govender further highlights that we are starting to see an overall reduction in household debt. The SARB bulletin for the first quarter of 2017 shows that, on an annual basis, growth in household debt slowed from 4.6% in 2015 to 3.9% in 2016, and the ratio of household debt to disposable income edged lower from 76.9% to 74.4% over the same period. “Recent improvements in the debt rate can be attributed to The National Credit Amendment Act 2016, which has imposed more stringent affordability requirements on borrowers, as well as a Nation that has simply used up all available credit,” says Govender. “Young South Africans are increasingly relying on credit to provide for basic needs, and there is a growing culture of people living way beyond their means and getting trapped in a cycle of short-term debt. Financial literacy education from an early age is vital to counteract this trend.”
Govender believes that we need to move away from negativity around South Africa’s savings rate to developing innovative savings alternatives and reinforcing positive savings behaviour. “Every Savings Month we work with our partners, including the large financial institutions that play such an important role in sharing knowledge, to find ways to educate and empower South Africans to save more. The household savings agenda is a key national priority. We believe that South Africans can save and invest more domestically for the greater good of our economy. As we sit in a technical recession, it is a fact that domestic savings can be a driver of internal economic growth. There has never been a better time to save than now.”
Alternative Savings Methods – Tips from SASI to help you save
Saving is not only dependent on income, it is largely dependent on willpower and discipline.
These solutions allow savers to have willpower and discipline by passing it on to others.
- Set a Target: The reason why many of us do not save is because we do not have set targets. It is important to set and write down important savings targets such as an Emergency Fund, Holiday Fund and other targeted savings. Do you know your targets?
- Automated Savings: Debit orders to Savings Accounts allow automated saving. You can set up debit orders Tax Free Savings Accounts (TFSA), 32 Day Notice Accounts and Unit Trust Accounts.
- 13th Cheque: Ask your employer payroll to save for a 13th cheque 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.
- Pension Fund Contributions: When starting a new job, ask your employer to default to the highest allowable retirement fund contribution percentage of your income. You can also ask your employer to review your current contribution. Best of all, all retirement funding contributions are tax deductible annually up to R 350 000.
- Financial Wellness Days: Ask your employer to give 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.
- Group Savings: Start of 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.
- Savings Buddy: Allow your partner or friend to be a savings buddy whom you meet with regularly to discuss your savings journey. By holding each other accountable, you can help each other to grow wealth.
- Baby Gifts: You can seed a child’s future savings by requesting baby gifts of cash to deposit into TFSA or even taking out a Retirement Annuity (RA) for a baby
- Children: Open TFSA Accounts for all your children to maximize the benefit they receive from these accounts. Set up Debit orders to contribute to these accounts as they grow up together with cash gifts they receive on birthdays etc. You can encourage grandparents and other family to also contribute regularly.
- Domestic Help: Set up a Savings account or Retirement Annuity for your domestic helper. These important members of our families’ are often forgotten in future planning.
- Retirement Fund Statement: By receiving your retirement fund statements monthly or quarterly, you can be encouraged to keep track of your savings to ensure that you have sufficient income when you retire.
- 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.
- Orlano Makubela, Chief Director of Financial Investments and Savings at National Treasury
- Sazini Mojapelo, Group Head of Citizenship at Barclays Africa
For more information contact:
Tamaryn Brown on behalf of SASI
Tel: 084 3510560
Obakeng Nyokong on behalf of Absa, Fleishman Hillard
Tel: 079 684 3623