South Africa has a reputation as a nation of spenders, rather than savers. And research shows that this spending is getting us into trouble, with many South Africans unable to make it through the month and drowning in debt.
This has been exacerbated by the pandemic, with data from debt counsellor DebtBusters revealing that unsecured debt levels have increased by 76 percent since 2016 for South Africans with a net income of R20 000 or more.
“Many South Africans are battling to make ends meet and, in fact, had to tap into their savings simply to survive during the pandemic,” says Katlego Gaborone, Momentum Financial Planner. “If anything, the pandemic highlighted that only a minority have a savings culture and have put money away for the future and their retirement.”
The Retirement Reality Report of 2020, for instance, showed that only 6 percent of South Africans said they had a retirement plan they had properly thought through – with more than 55 percent saying they do not have enough money at the end of the month to save.
It’s clear that something needs to change. “It starts with financial literacy. South Africans require a foundation of understanding around financial products, concepts and risks, as well as access to skills and resources that will allow them to recognise the importance of saving and equip them to make informed financial decisions,” says Gaborone.
Gaborone’s own approach to saving as a financial adviser is driven by inspiration from well-known successful businesspeople such as Warren Buffett – and his parents, who taught him the value of saving from a young age. Their guidance is the reason he saves 20 to 25 percent of his income and has created different savings accounts for different purposes – such as emergency funds, or for entertainment.
His tips to help other South Africans start saving and create a sustainable savings culture are:
Budget, budget, budget – creating and following a proper budget will allow you to prioritise what you should be spending money on and remove luxuries like eating out that are eating up much-needed income. “More of us also need to overcome and change our mentality of feeling we need to ‘keep up with the Joneses’. We should live within our means and spend only what we can afford,” Gaborone says.
Make saving an integral part of your monthly budget, and catch up on savings that you may have missed – saving needs to be considered an expense in your monthly budget, and treated like any other expense you need to pay off. This will make saving a portion of your income every month a habit, and soon it will become second nature. “And if you haven’t been able to save in the past, you should create a financial plan that calculates what savings you have missed out on – such as retirement – then work out how much you need to save to catch up to where you realistically should be, and put that money away each month. Also increase your savings whenever possible, such as when you get your annual salary increment,” he says.
Don’t live with regrets, be disciplined and strike the right balance between enjoying your life now and saving for the future you want – living your best life now, will ultimately prevent you from doing that in the future. The reality of life is that people are living longer, and you don’t want to outlive your money, so be realistic and think of the future and determine a set amount to put aside and save every month. “There is no reason that you can’t enjoy your life right now, you just need to strike the right balance, and this is where budgeting comes in. Have a budget and stick to it,” Gaborone says.
Educate yourself, and use what you are taught to help you save better – there is a world of knowledge available at your fingertips through Google, so equip yourself as much as you can and then find a professional, such as a financial planner who can help you put that knowledge to its best use.
Start now, with whatever amount you can afford – “the key is to start, and it doesn’t matter what amount you are able to save. Even if it is only R100, save it and use the power of compound interest to help make your money grow,” says Gaborone. “But start now.”