Saving can help companies prosper
This is especially important for small businesses, many of which fail because of poor financial reserves.
SMEs in South Africa are particularly vulnerable to the hardships the economy faces.
Brent Downard, Head of Credit Risk at Merchant Capital, says businesses should stop viewing savings as a luxury.
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The Citizen
2 days ago
- The Citizen
How to be a savvier saver and investor
National Savings Month is an initiative to promote healthier financial habits and encourage households to save. National Savings Month is almost over. Some consumers learned how to save, but how many know how to be a savvier saver and investor? 'In essence, the intention is to foster a culture where South Africans can become more financially disciplined, leading to greater financial independence. To foster this culture, South Africans must learn that small actions in savings and investments can make a big difference in their lives. 'There are positive changes in the financial advice industry that consumers can capitalise on to do this,' Steven Amey, head of Intermediated distribution at Ashburton Investments, says. ALSO READ: South Africans experiencing less financial stress, but still under pressure — survey Why healthier savings and investment habits are necessary According to Eighty20 XDS Credit Stress Report 2025 for the first quarter of 2025, South Africans rely too much on debt. Household debt reached an outstanding R2.56 trillion in the first quarter of 2025, up 2.1% from the previous quarter. 'The most concerning aspect of this is the number of overdue loans. A staggering 34.8% of all loans are in arrears, the first time in two years this number increased,' Amey warns. 'Consumers are battling to pay for rent, food and the basic necessities of life, yet we continue to spend on items that fall outside these categories, evidenced in the 'Mass Credit Market', representing the majority of the South African population. 'Interestingly, approximately 325 000 people started using credit for the first time, in the form of retail loans. Overdue payments on credit cards in the mass credit market increased and 53% are in default, unable to pay an instalment. On average, South Africans spend close to 30% of their income on loans.' ALSO READ: Survey shows how economic distress erodes South Africans' savings culture Statistics show we are not savvier savers Amey points out that according to TransUnion's South Africa Industry Insights Report for the first quarter, the growth in originations for new credit cards at 30.7% compared to the previous year far outstripped growth for other consumer credit products. He says this is cause for concern. How do you change to build better savings habits? Amey says there are a number of good habits South Africans can embrace to improve your financial well-being, including: reviewing your household budget to find where you can save; becoming financially self-disciplined because small changes in spending can make a big difference; and starting to save immediately without hesitation to reap the benefits of compound interest over time. Amey says to start with, you must separate your needs from your wants and rather use your hard-earned salary to pay for the essentials and save the rest or spoil yourself. 'We tend to overreach and spend more than we can afford. The statistics demonstrate this. 'Why extend yourself for short-term happiness when the inevitable of having to return your item or have it repossessed a few months later will cause greater embarrassment?' ALSO READ: How can you save when you use 75% of your income to pay debts? Options to be savvier savers and investors are available He says savings and investment options in South Africa are also evolving in South Africa. 'While learning to save is critical, turning savings into long-term investments is where real wealth is built. To do this, you must be aware of changes in the financial industry that can be leveraged for your benefit. 'The investment value chain dramatically improved for the regular retail investor over the past two decades. We moved from having an investment industry that largely sold financial solutions on the back of attractive commissions to one that has become well-regulated, respected and led by financial professionals that truly care about their clients' financial well-being.' Amey says it is interesting to note that the financial services industry splintered into various advisory groups, each with their own unique value proposition. Many advisors elected to join networks of advisors, ordinarily supported by large established industry providers which assist advisors with regulatory compliance and enable them to offer sound financial advice and a host of additional ancillary services to enhance their value proposition to their clients. In addition, large life and banking advisory divisions offer advisors many of the benefits of a network, with access to additional systems and services these large life and banking channels developed over decades. And then there are the larger, more established independent financial advisory practices that retained their total independence, leveraging the resources they accumulated over years of entrepreneurial practice, Amey says. ALSO READ: Five money mistakes that seem smart, but could cost you a lot later How qualified financial advisers can help us be savvier savers and investors 'Today's Qualified Independent Financial Advisors (IFAs) can render sound holistic financial advice and are regarded as the modern day 'sherpa'. Their role is to prepare and help you navigate the financial complexities of life. 'Holistic financial planning is the epitome, where there is no longer a focus on a single need but a comprehensive analysis, incorporating all aspects of financial planning, from budgeting to cash-flow analysis, tax planning, investment planning and estate planning. 'Once all of this and more is compiled into an understandable and executable financial strategy, financial products, platforms and solutions can be recommended to enable your unique plan.' Amey also warns that while robo-advisor platforms are prevalent and tempting, they should be used only by more informed and astute investors. 'The need for financial advice from a qualified financial advisor remains as strong as ever despite these latest developments.' According to the March report of the Association for Savings and Investment South Africa (ASISA), there are a plethora of investment options available to investors. For instance, there are 1 884 unit trusts (100+ being passive or 'Smart Beta Funds'), commodity funds, hedge funds, structured products, private equity, venture capital funds, fine art, actively managed certificates (AMCs) and more to select from, all adding to the financial complexity investors are facing. 'This is why it is critical to get advice from a qualified financial advisor.' ALSO READ: Savings month: How to save like a millionaire – even if you are not one yet How discretionary fund managers can help us be better savers and investors Amy points out that one very important development is the recent steep growth in discretionary fund managers (DFMs) in South Africa. 'DFMs removed the burden of the advisor having to perform in-depth investment management due diligence and the complexity of having to compile detailed economic and asset management reports. 'Most DFMs have experienced teams, with sound investment processes and philosophies mastered over several years, for the benefit of the advisors they serve. In addition, many DFMs manage significant assets, which can enable them to negotiate reduced asset management fees on behalf of advisors.' He says the investment portfolios they compile may be personalised for the needs of certain financial planning practices or more generally to serve broader financial advisor needs. These portfolios usually comprise large and boutique active asset managers, as well as passive and smart beta investment strategies to reduce overall investment portfolio costs. Advisors then invest their clients' assets into these portfolios to achieve desired investment outcomes.' Amey says it is clear that many DFMs 'add significant value, segregating roles and responsibilities to ensure the advisors they partner with can focus on what they do best'. 'The savings and investment industry evolved significantly over the past two decades. If you want to change your financial fate you must tap into this opportunity. The way to do this is to partner with the highly skilled new generation of accredited financial advisors who lead from the front, acting as much needed financial sherpas for South Africans who want to build a better future.'
The Citizen
20-07-2025
- The Citizen
Survey shows how economic distress erodes South Africans' savings culture
Consumers find it difficult to stick to a savings culture while the economy causes so much financial distress. Concerning insights from the latest Debt Rescue consumer savings survey highlight a severe disconnect between South Africans' desire to save and their inability to. This is in no small part due to South Africa's struggling economy and its impact on consumers, painting a grim picture of a nation living from month to month and on the brink of financial ruin. Neil Roets, CEO of Debt Rescue, says with the majority of consumers now barely even able to live from pay cheque to pay cheque and many relying on freelance or seasonal work, savings are becoming a luxury most South Africans can no longer afford. He emphasises that they need urgent, practical financial support to help households build financial resilience in an increasingly unaffordable economic climate. 'At least two-thirds of our respondents say that despite prioritising saving every month, they are finding it close to impossible to do so now, due to financial hardship and challenges resulting from the country's economic downturn.' ALSO READ: Ordinary South Africans will feel impact of US tariffs Survey shows consumers are trying to continue savings culture Key insights from the survey, which coincides with National Savings Month in July, show that South Africans are desperately trying to secure their future finances and shield their families from even greater economic duress, but are failing miserably due to immediate basic needs barely being met. A total of 48% of respondents report that they cannot cover basic essentials like food, energy, housing and healthcare, while another 41% say they only just manage their essential day-to-day living costs. Roets points out that there is clearly no lack of will on the part of consumers. 'While it is encouraging that 87% of respondents are actively trying to improve their saving habits, the resolve to save is simply not enough in the face of serious financial strain.' He says the unsustainably high cost of living is the primary barrier, with nearly half of those polled (47%) citing the high cost of living as their main barrier to saving, while 27% attribute unexpected expenses such as medical bills as the primary reason they fail. ALSO READ: Latest petrol price increase puts SA consumers on backfoot again This is how savings culture is failing in SA Some of the stand-out insights from the survey are: 35% of respondents prioritise building an emergency fund as their most important savings goal, highlighting how many are conscious of the reality that they might be living one crisis away from financial collapse. Almost a third (27%) do not save any of their income, while 29% save less than 5%. Only 18% manage to save more than 10% of their income monthly. Saving behaviours are worsening: 26% of people polled say they save less now than they did a year ago, while 23% say they stopped saving altogether. Only 20% managed to increase their savings. ALSO READ: Are you a young professional? Here's how to avoid the debt trap Beware: hope is not a strategy – avoid online gambling to save your financial problems On the back of the financial travails that plague millions of South African households, a mammoth new social ill has reared its ugly head and is far bigger than most people realise, Roets says. Online gambling increased by 550% in only four years with no sign of a reprieve, reaching a turnover of R1.14-trillion in the 2023/24 year, or nearly 17% of GDP. The best available research shows that it is mainly low-income South Africans who gamble away an astonishing share of their monthly pay, out of sheer desperation, undoubtedly hoping for big winnings that will somehow transform their circumstances. 'Meanwhile, the national consumer debt crisis is deepening with the latest figures showing that the debt to disposable income ratio for South African households has increased to a current level of around 75%, which is higher than the long-term average of 70% according to the South African Reserve Bank (Sarb). 'What all of this points to is that, while South Africans want to save, they simply do not have the means to do so and are relying more and more on credit, the state and/or turning to risky behaviours like gambling to manage everyday living costs. 'Consumers have already started to downgrade their lifestyle costs or cut them out completely, and this is very concerning in areas such as insurance, which places them in a vulnerable situation.'
The Citizen
19-07-2025
- The Citizen
How can you save when you use 75% of your income to pay debts?
You would excuse South African consumers for being cynical about saving given that their money runs out before the month does. Most consumers are cynical about National Savings Month in July, asking how they can even begin to think about saving when they spend 75% of their income to repay debts which are usually the result of borrowing just to survive. According to the 2025 1Life Generational Debt Survey, only 41% of employed South Africans manage to save each month and even those who do are often not saving nearly enough to build financial security. A further 36% say they simply do not earn enough to save at all. The situation is just as concerning among middle- to higher-income earners, as DebtBusters reports that individuals earning R5 000 or less are using 75% of their income to service debt. People earning R35 000 or more are not much better off, spending 74% of their income on debt repayments. 'Too many South Africans are overwhelmed by debt and living paycheque to paycheque, but no matter your income level, there are real, practical steps you can take to regain control, build healthier money habits and start working towards long-term financial stability,' Hayley Parry, money coach and facilitator at 1Life's Truth About Money, says. ALSO READ: Savings month: How to save like a millionaire – even if you are not one yet Stop telling consumers they must save and show them how to Tando Ngibe, senior manager at Budget Insurance, says we must move beyond simply telling people to save and start showing them how. 'Budgeting does not have to be complicated. Even small changes can create breathing room and protect you from the financial shocks that so often derail progress. It is about building a new culture of money awareness and resilience.' Insights from the 2025 1Life Generational Debt Survey paint a sobering picture of the nation's financial health: 22% of respondents admit that past financial decisions have left them in debt 34% are carrying inherited debt passed on by previous generations 53% still believe they can build generational wealth, even with a modest income. Separate research from Trading Economics highlights just how strained household budgets are. South Africa's household savings rate dropped to -1.2% in the fourth quarter of 2024 from -1.0% in the third quarter, according to Trading Economics. Parry and Ngibe agree that while the data is sobering, it is not the end of the story. ALSO READ: Savings month: Here's how to build your financial future brick by brick Stop judging consumers for not saving and equip them to Parry says they are not there to judge, but to equip. 'Financial freedom starts with knowledge and consistent action. Even if your starting point is deep in debt, there is always a way forward and platforms like 1Life's Truth About Money, which offers free courses tailored to different life stages, are designed to help South Africans take that first step. 'The choices we make today do not just affect our own futures; they have the power to break cycles of inherited debt and create lasting financial security for the next generation.' Ngibe echoes this sentiment, saying it is time to demystify money. 'Savings Month is not just about setting aside cash but about shifting mindsets, breaking generational cycles and making sure every rand works as hard as you do. With the right tools, support and commitment, financial resilience is possible.' They say this National Savings Month, the message is clear: it is never too early or too late to take back control of your money, and you do not have to do it alone.
