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SA urged to make better efforts to save - July savings month

With latest figures from the central bank indicating that South African household debt stands at 75% of disposable income, and an average of 6 000 South Africans applying for debt counseling every month, consumers are being urged to avoid the use of credit where possible and begin to start saving money to better ensure a sound financial future.

According to the Finscope 2011 study, 66% of the South African population currently does not save any money, citing lack of funds as the main reason.

Gavin Came, Chairman of the Financial Planning Committee at the Financial Intermediaries Association of Southern Africa (FIA), says this alarmingly low level of savings in South Africa is incredibly worrisome as it not only hinders the financial security of many South Africans, but also negatively affects the economic stability of the country as a whole.

One of the common problems among consumers is that they simply stick their head in the sand with regards to their financial affairs, says Came. “Most people realise the importance of having savings in place but are unable or unwilling to defer short term consumption such as buying new clothes or a new car, or paying for an annual holiday. As a result, their immediate wants tend to take priority over provision for the future.”

He warns that because not saving enough for retirement is a common trend, in the long-term it is often these same people who are then prone to making rash decisions later in life when they realise they do not have sufficient savings to meet their needs. “We often see that the victims of get-rich-quick-schemes are pensioners who realise they have not saved enough during their working life and are seeking a quick-fix solution to fund their retirement. These are the very people who can least afford to take such a huge risk and the outcome is often disastrous.”

He says it is crucial that consumers start to make themselves aware of their true savings requirements in order to avoid such a consequence. “It is important that people take their financial commitments seriously and have an overall financial plan in place that addresses both their short and long term needs. If they don’t do this, then what may be classed as poor savings habits now can prove to be disastrous a few years down the line. The task of providing for a comfortable future is much easier and financially painless if you start early, by simply setting aside 15% of your income from day one and a comfortable retirement is easily attainable.”

He says critical to this process is employing the services of a financial adviser, who can make recommendations based on someone’s personal circumstances and steer them in the right direction in terms of meeting their financial goals. “Financial planners can help people to devise a financial plan, and make sure that clients not only adhere to that plan but also help them to get back on track if they do deviate.”

“While it is tempting to ignore the demands of the future and concentrate purely on their short term needs, by engaging the services of a qualified and professional financial planner early enough, consumers can plan for a comfortable retirement without being forced to make significant compromises to their current lifestyle,” concludes Came.

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