Savings your risk management tool in case of catastrophe

By Staff Writer
Life requires a Plan B and that normally means a savings nest-egg to tide you over when things go wrong. Unfortunately most South Africans simply hope for the best and make little provision for tough times.

The enduring need for a savings ‘cushion' is one of the key National Savings Month messages from the South African Savings Institute (SASI) as the annual awareness-raising initiative picks up momentum nationwide.

The theme - ‘Save for the Goal: The Path to Recovery' - emphasises long-term goal-setting and the role of savings as South Africa moves out of recession.

Recession was a wake-up call for many families, says Elizabeth Lwanga-Nanziri, SASI chief executive officer, and emphasised the need for savings as a coping mechanism.

She explains: "Saving for possible disaster is often put into the context of a car crash, industrial accidents, death or permanent injury. Specific insurance-based products exist to help consumers provide for risks such as this.

"But many other types of catastrophe occur, and in all instances it is advisable to have a cash reserve saved up to help you cope.

"One of the biggest catastrophes faced by the average family is retrenchment. It's devastating when a family breadwinner has been made redundant. Savings won't give you your job back, but at least they cushion the blow while you look for new work during the recovery."

In June, Statistics South Africa revealed that in the first quarter of the year - with South Africa in the recovery phase - 79 000 jobs were loss. In 2009, the economy shed 870 000 jobs in all.

"Job cuts in a growing economy are a reminder that unpleasant surprises can occur at any time," Elizabeth Lwanga-Nanziri.

"A savings nest-egg is the Plan B we all need. People say they can't afford to save. The truth is they can't afford not to."

SASI says it's never too late to start and recommends a simple five-step plan:

  1. Have a dream... think about what you want to achieve for yourself and your family
  2. Write it down ... set short-, medium- and long-term timeframes and write them down
  3. Make a savings plan ... estimate what you need to set aside weekly or monthly to reach your goals and start putting that money into savings products
  4. Draw up a household budget: make sure you know where your income goes, decide where to cut expenses and outgoings
  5. Stick to your plan: turn saving into a habit and don't let your savings plan slide.

Elizabeth Lwanga-Nanziri adds: "Hopefully, disaster won't strike. You then have a savings nest-egg that will continue to grow thanks to the miracle of annual compounding. But it would be a catastrophe if you wasted your cash reserve by frittering it away."

 

 

Recent Articles

Featured Should you authorize a minor on your credit card?

If you have children who need to move around independently, it may be practical to authorize them as users on your credit card. However, is this the right thing to do?

Economic devastation sees rapid rise in debt counselling

A survey conducted by DebtBusters indicates that consumers are increasingly turning to debt counselling.

How to reduce your risk of identity theft

Imagine your friend is a victim of identity fraud. We have a look at what this entails, and we find out what you can do to avoid getting into this situation yourself.

Deals

Wednesday Burger Nights at The Vineyard

Price: R190
When: Wednesdays
Where: Cape Town

Sanctuary Touch Monthly Special at Sanctuary Spa

Price: R490
When: Mondays to Sundays
Where: Cape Town

Blowdry Packages at Oayssis Hair and Beauty Bar

Price: R850 to R1800
When: Anytime
Where: Cape Town


Latest Guide

Guide to debt rehabilitation solutions