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July highlights SA’s poor savings culture

July 12, 2016 7:28 am by: Category: Africa & World, Featured, Finance & Banks, Investing, National Leave a comment A+ / A-

PIGGY BANKMTHULISI SIBANDA
JOHANNESBURG – SOUTH Africa’s poor savings culture is on the spotlight as the country marks Savings Month.

The domestic savings rate has declined steadily over the last 50 years from an average of just more than 24 percent between 1960 and 1990, to 16,5 percent from 1991 to 2014, and just 16 percent over the last decade.

The rate is said to remain poor even compared to other emerging markets.

Zeona Jacobs, Director for Marketing and Corporate Affairs at the Johannesburg Stock Exchange (JSE), cites poor financial literacy among most of South Africa’s population for the declining savings rate.

“As a country we need to do better to encourage people to save and invest and eventually lessen the burden on the government’s pot,” says Jacobs

She says for South Africa’s economy to grow, more people need to take action with their personal finances and take the first steps to invest.

“It is never too late,” adds Jacobs.

She cites misconceptions about the JSE as an example hindering financial literacy.

“Many people around dinner tables and braais think the JSE is owned by a handful of wealthy people. Yet, the JSE is the place where most people’s pensions are most likely to be invested.”

The largest investors on the JSE are retirement funds, managed on behalf of people with unit trusts, or a retirement fund at their workplace.

Another misconception is that one needs lots of money to trade on the JSE.

Citizens can invest on the JSE through a tax-free savings account (TFSA) for a minimum of only R300 per month, which enables them to get access to the stock market through a wide range of exchange-traded funds (ETFs).

To date, more than 20 000 TFSA accounts have been opened on the JSE, investing in the range of 39 ETFs with over R200 million in assets under management.

“We believe there is scope for a lot more growth in this area, but we need savers to take an active part in their financial futures by equipping themselves with the necessary knowledge and by asking their brokers and advisors the right questions, ” says Jacobs.

Ester Ochse, Channel Head at FNB Financial Advisory, says in spite of ongoing efforts, many people still find it hard to adopt the culture of saving.

She says Savings Month, July, is an ideal time to start exploring suitable solutions as financial services providers such banks will be showcasing their respective savings or investment vehicles.

“This will give people plenty of options to select a solution that is ideal for their needs,” says Ochse.

She offers tips, including choosing a goal to save or invest towards, thinking long-term, choosing the ideal savings or investment vehicle and consider speaking to a financial adviser for guidance.

Ochse explains being goal-based will help focus and serve as a source of encouragement.

She says education and retirement were some of the major goals that people often save or invest for.

However, people can also save or invest to instil a certain culture within their families, especially among children.

“One of the major incentives at the moment is that there are investment or savings vehicles where people pay little or no tax until their investment reaches a certain stage of maturity. It’s important to take advantage of such because SA citizens are among the most taxed in the world,” Ochse says.
John Manyike, Old Mutual Head of Financial Education, says the poor saving culture is backed by recent statistics that show a 214 percent increase in consumers between 21 years-old and 25 applying for debt review from 2014 to 2015.

“These statistics highlight the fact that young South Africans are increasingly relying on credit to provide for themselves and their families’ basic needs, and indicate a growing culture of people living way beyond their means,” Manyike says.

Manyike says this credit-funded lifestyle, promoted by popular culture, exposes people to the risk of getting trapped in a cycle of short-term debt from an early age.

“The key reason for the increase in credit addiction is the low level of financial literacy among young South Africans. To break the cycle of generational debt and a low savings culture in SA, it is imperative that financial literacy be entrenched in our population from as young as possible,” adds Manyike.

Savings Month is the brainchild of the South African Savings Institute (SASI), an independent non-profit organisation dedicated to developing a robust culture of saving in South Africa. It was initiated in 2001.
SASI says among commitments to enhance the culture of saving, apart from founding the National Savings Month campaign, which has led to general acceptance of July as savings month, SASI also co-founded with the Banking Association of South Africa (BASA) the Teach Children to Save campaign, now known as Starsavers, the largest initiative to educate children on saving in South Africa.

“Very early in our existence we realised that we could not succeed without joining forces with other like-minded organizations. So, we formed partnerships to promote the importance of building a strong savings culture in South Africa,” SASI Chairperson, Prem Govender.

This year’s theme for Savings Month is simply Celebrating Savers and Savings.

July highlights SA’s poor savings culture Reviewed by on . MTHULISI SIBANDA JOHANNESBURG - SOUTH Africa’s poor savings culture is on the spotlight as the country marks Savings Month. The domestic savings rate has declin MTHULISI SIBANDA JOHANNESBURG - SOUTH Africa’s poor savings culture is on the spotlight as the country marks Savings Month. The domestic savings rate has declin Rating: 0

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