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THE REAL REASONS WHY SOUTH AFRICANS AREN’T SAVING SISANDILE CIKIDO delves into why the savings rate is so low in the country, despite the fact that it appears that most South Africans actually want to save. She suggests the solution lies in better, simpler savings products and boosted financial education.
OVER the years, banks and financial experts have made ongoing calls for South Africans to save for the proverbial “rainy day”. Then, in March 2020, that rainy day arrived, as Covid-19 delivered a torrent of financial challenges that left anyone without accessible savings and investments struggling. A recent study conducted by a leading data analytics firm, Kantar, revealed some very interesting insights into the real reasons behind why so few South Africans are saving. And unfortunately, the hard lessons Covid-19 delivered about the importance of saving still don’t appear to have been taken to heart by many South Africans. Arguably one of the most interesting findings of the research was that, contrary to widely held perceptions, most South Africans want to save, and they understand the importance of doing so. However, the large majority find it difficult to do so because they find most formal savings offerings overly complex and intimidating, and they simply don’t understand how the typical savings account can help them grow their money.
RISKY APPROACH In addition, the research also revealed that the younger generation is increasingly turning to new ways of growing their money, such as share and forex trading and cryptocurrency, as they generally have a greater appetite for risk than tried and tested savings vehicles. This is an indication that younger investors look for more aggressive growth as they want to build wealth and fast, which isn’t necessarily a bad thing. With time on their side this allows investments to go through various stages of growth, and, in bad seasons, they have the time to wait out the storm. However, it is imperative for young investors to investigate all investment platforms and do their research on any asset class or investment type. This is to preserve losing the very wealth they are trying to build. The research findings further highlighted that many people are reticent to put their money into a formal savings product because they see banks as less of a partner in building financial security, and more of a gatekeeper, forcing
them to ask permission and jump through hoops to then get their money back when they need to. This misperception isn’t helped by the fact that many people believe that formal savings products simply aren’t meant for them, but are rather targeted at wealthy individuals who have high levels of financial literacy. DIFFERENT VEHICLES FOR DIFFERENT GOALS This also highlights another significant hindrance to the development of a much-needed savings culture in South Africa, which is that few individuals recognise, or understand, that the various savings products available through formal channels are designed to help savers meet very specific goals. So, for example, someone who needs to save money that they may need quickly for an emergency would choose a very different savings account to the person who has five years in which to save towards a long-term goal. And the savings goals inform the design of the savings solution, which means some prioritise access over interest levels, while
