Nearly two out of five people cannot afford to put money aside for savings or investments, according to a poll of visitors to www.justmoney.co.za.
Although 43% of respondents to the poll said they saved or invested money on a monthly basis, 38% of people confessed they could not afford to save or invest at all, whilst a further 6% said they rarely saved or invested their money. The remaining 13% of respondents said they saved or invested their money whenever they could.
The poll follows hot on the heels of research by the South African Savings Institute which found that people in this country on average only save 20 cents in every R100. Instead, according to Paul Beadle, managing director of www.justmoney.co.za, people are spending money they do not have and racking up an estimated R900 billion in debts.
Beadle explains: "At www.justmoney.co.za we see thousands of people applying for personal loans and credit cards, as well as a growing number looking for help managing their debts. The problem is that today consumers want instant gratification and prefer to buy on credit now rather than saving and paying cash later. www.justmoney.co.za attracts a lot of financially savvy users, which is probably why the number of savers in our poll is as high as it is - I think the real number of people in South Africa who cannot afford to save is probably a lot higher."
Beadle says that part of the issue is that before the introduction of the National Credit Act (NCA), banks, lenders and retailers were keen to offer credit in the form of loans, credit cards and hire purchase agreements to drum up business. He says that because so many people had easy access to credit, the savings culture that older generations had to rely on has disappeared.
However, Beadle says that the products available for savings and investments can be confusing, particularly for people not used to putting money aside. He continues: "People have to get back into the habit of saving, but first they need to understand what their savings options are and which products suit them best. There are some very good savings products available, but there are also some very poor offerings from the banks - so-called savings accounts that actually pay very little in interest."
www.justmoney.co.za has compiled some tips for people who want to save more and improve their overall financial circumstances. Beadle continues: "People who save more are less likely to get into debt, and because they are thinking about the future with investments and pensions, or just by putting money away for a rainy day, they and their families will be in a better financial situation as they get older."
The www.justmoney.co.za savings and investment tips
1. Pay off your debts first! The debit interest on even the cheapest debt will be much higher than what you can earn in the best savings account, so clearing your debts is more cost-effective in the long term
2. Get a bank account that pays decent interest. Many ordinary bank accounts pay little or no interest, but some accounts - such as those offered by Go Banking and Capitec - offer all the transactional abilities of standard accounts, but also pay you interest on even the lowest balance in your account - click here to search for cheaper bank accounts
3. Save as much as you can - regularly. Experts say should save at least 15% of your salary each month and have a cushion of three months' salary in the bank for ‘a rainy day'. Work out your budget, see how much you can afford and set up a debit order to save a regular amount each month - click here to search for savings accounts
4. Short-term or long-term savings? If you want instant access to your savings, then the interest you can earn will be lower. But if you tie up your money for a year or two, or even with a 32-day notice account, you'll earn more and the temptation to spend it will be much less! - click here to search for savings accounts
5. Get investment advice. If you are looking for potentially higher returns from your money, then investment in unit trusts or a pension is something to consider. But this brings higher risks - particularly with the volatile stock markets - so always get advice from a qualified independent financial planner.
6. www.Justmoney.co.za's top tip - pay as much into your mortgage as possible! If you do have money left over at the end of the month, use it to pay off more of your mortgage. Not only will this save you interest and money on your home loan, it will help you pay off the mortgage quicker, saving even more cash. And as your home should be an appreciating asset, it is one of the best investment options around! - click here to find a better mortgage