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July is Savings Month, an initiative by the SA Savings Institute (Sasi) to raise awareness about the importance of being financially secure. It’s a fairly broad initiative that also pulls in elements of financial planning and investing.

As a nation we are terrible at saving. In a Sasi report from 2019, before anyone knew about Covid-19, household debt as a percentage of disposable income stood at a staggering 71.9%. Put simply, for every rand earned, nearly three-quarters was spent on debt. The pandemic has improved this slightly: despite the detrimental effect on the economy of lockdown after lockdown, consumers have been saving more and spending less. But only marginally so.

According to a Trading Economics report using data from Stats SA, the household saving rate increased to 0.7% in the first quarter of 2021, from 0.5% in the fourth quarter of 2020. For much of 2019 this rate hovered at about -0.5%. In other words, over the course of two years, the average South African has gone from spending more than they earn, to barely breaking even at the end of each month.

It’s a depressing situation and highlights the critical importance of campaigns like Savings Month. Much of Sasi’s focus is on education at an individual level: getting people to understand the difference between saving for the short-term, such as maintaining an emergency fund, and investing for the long-term, such as contributing to a retirement annuity. There’s messaging about “good” debt versus “bad” debt, and the danger of reckless credit.

In 2019, Sasi even invented a hashtag, #crazywaystosave, with acting CEO Gerald Mwandiambira giving examples such as stocking up on condiments at fast-food stores, making your own laundry soap and literally freezing your credit card.

These are fun ideas and do well to start conversations on social media, but making your own laundry soap is not going to turn the SA savings crisis around. This is because individuals are at the mercy of the financial institutions that look after their money. Unless those institutions embrace a money management culture and make it much easier for customers to budget and save, we’ll continue to go backwards. 

How do we build a money-management culture? It starts with giving customers the tools they need to look after their own finances — and encouraging them to use those tools. In our current environment it’s very difficult for a customer to keep track of all of their spending, savings and investments, even if they do everything through a single bank. There are deliberate barriers to entry, misaligned incentives and products that are almost purposely hard to understand for the man or woman on the street.

It doesn’t have to be this way. Institutions can develop these tools themselves or partner with fintechs to help customers track their net worth and budget accordingly. Customers who have their budget at their fingertips, who don’t feel the pressure to file receipts and keep complicated spreadsheets, will be empowered to manage their money better and will be more likely to identify ways to save.

A money-management culture is good for business, too. Financial institutions can build a more financially resilient customer base, learn more about their customers and design products that meet their customers’ needs, instead of firebombing their client base with product offers that might only be relevant to a small percentage of that base.

Every company in the financial space has a social responsibility to uplift SA. At the moment, precious few are succeeding. The savings rate and GDP growth are inextricably linked — the economy can’t begin to recover until we save better. It’s high time companies take note of this message and help Sasi by promoting a customer-first money-management culture.

• Joseph is MD of budgeting app 22seven.


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