MONEY CAN EITHER MAKE OR BREAK YOU
By: Sonam Bhagwandas
We all have vast dreams of being able to purchase our own homes, cars and to live in the lap of luxury. Unfortunately the reality is that we all cannot afford to live as such and some even tend to live in the worst conditions due to the lack of employment and ultimately no income.
We tend to live in a world where money is of great importance but it is spent so easily without even a second thought. The month of July is set aside to alert citizens about saving in South Africa with it being known as National Savings Month.
National Savings Month is an awareness campaign run by the South African Savings Institute (SASI) and was launched in April 2001 by the then Finance Minister, Trevor Manuel. SASI is a non-profit organisation that aims to cultivate an environment of saving among all South Africans. We are all eventually affected by the savings or the lack thereof in South Africa and during this month the importance of saving for you and your family is highly stressed upon.
On 4 July 2013, the South African Savings Month launch was held in Sandton with the keynote address given by the Deputy Minister of Finance, Nhlanhla Nene. She touched upon many topics that ultimately influence saving among South Africans with her main focus being saving literacy in the country.
“Lack of knowledge about financial matters disempowers us. So, government and the private sector, both as employers and providers of financial services, have a big role to play in improving levels of financial literacy. The need to increase levels of financial literacy has become even more urgent given the fact that governments and employers have, over the years, been shifting greater financial risks onto individuals,” stated Nene.
She went on to mention that with higher levels of financial literacy, individuals will be able to equip themselves with the knowledge to shop for relatively cheaper options and manage their debt better, as well as alert them to the dangers of excessive and reckless debt.
The latest statistics on South Africa’s household savings was recently published by the South African Institute for Race Relations (SAIRR). In the period 1994 to 2011, our national savings rate dropped from 2.7% to -0.1%. This means that we are now spending more than we earn and debt is easily incurred.
For some, spending money comes naturally when you have a lot of it and you don’t think about putting a portion of it away for your future. Whereas others are not even able to make ends meet to feed their families, so naturally saving money would not be an option. A few years into their retirement, many South Africans discover that they have not saved enough. People assume that the money they pay into a pension fund will be enough but it is not the case anymore. Savings are driven by the ability the save and the willingness to save.
Since the culture of saving is not practised wisely in South Africa, many are unaware of July being National Savings month. A question posed on social networking sites asked people if they knew about savings month and if they currently save or not. Majority were unaware of the fact that savings has such an impact on our lives. When asked about whether they save or not, it was evident that most do not save.
Michael Pilaros, a lecturer of Philosophy and Psychology to corporate companies and their leaders, stated that often times his spending exceeds his income.
“South Africans do not save and most times even if they are given an increase in their income it is used for lifestyle upgrades. The basic savings of 10% does not work here as it is not thought and practised,” said Pilaros.
“I also find it extremely difficult to save as most times my spending exceeds my income,” admitted Pilaros.
According to a report from SASI, saving on a small income is possible. By following a few rules you should find that a small amount is available to be put aside at the end of every month.
Here are a few ways you can save:
- Change your mind-set from being comfortable with debt stress to being in control of your finances i.e. commit to being debt free in 3, 6 or 12 months
- Draft a realistic budget, revisit the budget monthly and be disciplined with your spending, particularly the small everyday items.
- Be prepared for emergencies such as medical bills and car and home repairs.
- Make a note of all your purchases. That way you will be aware of unnecessary spending that could be used towards paying off existing debt.
- Destroy one of your credit cards, pay off the debt, then destroy the next etc
- Pay off the debt that has the highest interest rate first
- Pay off debt as fast as you can – you can save the interest you would have paid on the debt
- Do not borrow money to pay off debt and do not use one credit card to pay another
- Do not open any retail store accounts as this encourages unnecessary spending.
- Don’t ‘reward’ yourself with items bought on credit
- Start saving a little amount alongside your debt repayments and increase your savings with the instalments of the paid-up debt.
- Get a moneybox and save the money that you would have spent on the lottery, cigarettes etc. for the next year – the rewards are so much greater!It seems that South Africans need to be shaken up and made to understand the importance of saving. It is clearly not something that can be put off but requires immediate and on-going attention. The benefits of saving are endless and will ultimately result in a better South Africa.