The MasterCard Survey of Consumer Purchasing Priorities recently revealed that 70% of South Africans plan to either save ‘the same or more’ over the next six months. This is a decrease from the 92% who said the same thing in the previous survey.
Forty seven percent of the survey respondents who plan to save ‘the same or more’ said ‘retirement’ is the main reason for saving, a 10% increase compared to the preceding six months.
“The low savings rate in South Africa is widely reported and while a decrease in saving is not ideal, it is nonetheless encouraging to see that a significant number of South Africans are taking notice of local and global financial conditions, and that saving priorities lie in future planning,” said Philip Panaino, division president of MasterCard South Africa.
Looking towards retirement
The majority (45%) of respondents said they planned to save between 1% and 10% of their total monthly income over the next six months. Eighteen percent said they planned to save between 11% and 20% of their income while just 7% plan to save between 21% and 30%.
According to Sasfin financial consultant, Gavin Came, saving 10% of your monthly income is the best way to start saving for retirement but people who can’t afford this shouldn’t feel discouraged to save.
“Less than 10% of South Africans are saving anything for retirement so the people who do save less than 10%, are still part of the minority. There is no real fixed way to determine this but if you start saving between the ages of 30 and 35 years, it is a good idea to save between 15% and 20%,” said Came.
The survey also showed that half of the respondents felt they could retire with enough financial support between the ages of 51 and 60, followed by 43% who said between the ages of 61 and 70. Five percent of the respondents believed they could retire before the age of 50. The average age of comfortable retirement was reported as 62, up two years from last year’s average of 60 years.
When it comes to retirement saving, Came said people get into trouble when they relied on lifestyle assets as their retirement nest egg.
“If you consider your house as a retirement investment you need to consider that once you sell it, you still have to spend money on whatever property you will live in afterwards,” said Came.
South Africans overall culture of saving and spending
Came warned that with the increase of unsecured lending, many South Africans still need to learn more about how to manage their finances properly.
“In the cases of unsecured credit borrowing, the lender shouldn’t have to take all the responsibility. People are desperate and even if they don’t get a loan at one place, they will find somewhere else to borrow credit. People should first look at where they can cut their expenses when they are desperate for money,” said Came.