Is it time to get saving?

By Staff Writer

Phillip Matlakala who is the CEO of Metropolitan Retail has recently commented on creating a culture of savings in South Africa. We have a comparatively low rate of savings compared to the rest of the world and we don't care much for saving here. There is also a perception that the banks are overpriced. However many folk get confused between saving and investing. Now to put your cash in a savings account that pays less interest than inflation takes value away is not an investment decision, but it is a way of storing up money that will hold value longer than cash under the bed.

 

 

The comments referred to above have sparked a discussion about the relevance of savings. A Fin24 article noted that in developing countries those countries with the highest rates of savings tend to do well. Remember savings is not investment. An investment is designed to grow capital or to hedge it against the steadily eroding values in a growth model economy. Savings are sums that are put aside for later, it is that proportion of your income that is not spent, and if you keep it in cash under your bed you will lose value quicker to inflation than if you put it in a bank savings account, even if that account only pays low rates of interest.

Savings accounts act as a buffer against uncertainty. Just for general living a buffer of three months income should be able to see you through any unexpected shocks, the bigger your buffer gets that longer you can hold out if things go wrong. Fast developing countries, like India and China, know this. They use the government to encourage savings and we should be doing the same thing here in South Africa if we are serious about a development economy being developed here. So get a savings account today and start planning that budget to buffer you against the future and smooth your ride while you go there.

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