It's Savings Month, but if you can still afford to save in the current circumstances, you’re probably in a small minority.
With an unemployment rate of more than 30% during the first quarter of this year, extreme indebtedness and dismal savings rates even before Covid-19, consumers are too exposed to a crisis. With nothing to fall back on for a “rainy day” and seemingly no plan, consumers need to develop skills to see themselves through this crisis - and the next inevitable one.
It’s a lesson the South African Savings Institute (Sasi) hopes to inculcate through a series of webinars on financial resilience (see “Dates and topics of ‘Ways to Save’ webinar series”).
A recent TransUnion South Africa financial hardship study indicated that 83% of consumers had seen their household incomes negatively affected by the pandemic. Of those affected consumers, 91% said they were concerned about paying their bills.
The credit reporting agency’s South African Industry Insights Report for the first quarter of this year showed that outstanding balances continued to grow across all major consumer lending categories and was strongest for non-bank personal loans at 17.2% year on year.
The only category to maintain balanced growth was bank personal loans, which was at a rate comparable to the highs of last year and consumer demand for credit remained strong, with enquiries across the five major credit categories up 12% year on year.
Shelley van der Westhuizen, head of corporate financial well-being and engagement at Alexander Forbes, says the Covid-19 crisis has raised awareness among South African households about the importance of setting money aside to sustain themselves for longer periods.
“You need to ask, what are my priorities, not only in the short term to fund my survival,” Van der Westhuizen says.
“There are surprising areas where you can save - delay spending, look for cheaper alternatives, form new habits. Be proactive. A lot of our decision-making is emotional, so we don’t optimise financially, because we’re attached to goods and ideas. Some things are fixed, but others can be moved into an optional bucket. We need to start future-proofing to build our resilience.”
Rainy-day funds
Covid-19 is front and centre of Savings Month, says Prem Govender, chairperson of Sasi.
This month, Sasi’s awareness campaign will focus on inculcating resilience through a culture of savings. “We asked, in light of the crisis, is it insensitive to run Savings Month when people can barely afford to put food on the table?
“But our focus has to be on building financial resilience to help during such times and learning how to stretch the rand,” Govender says.
Those who had an emergency fund at the beginning of the year have weathered the storm better than those without, she notes.
“If you had a rainy-day fund - and nothing can be rainier than Covid-19 - having savings and not having debt helped people overcome this period of uncertainty.”
For Gerald Mwandiambira, acting chief executive of Sasi, the crisis has highlighted the importance of having a plan in place and being in charge.
“My acronym for this month is FATE: be in control of food expenses, cut back on your accommodation and transport costs, and rethink your entertainment and even education, so if home-schooling is an option, consider it,” he says.
Reality check
Taking the lessons from lockdown into the future will help build resilience, Mwandiambira believes.
“Face reality: if you are in a situation, rather negotiate settlement with your creditors, which will prevent judgments that will stop you from picking yourself up.”
Govender adds that Covid-19 will force people to change their attitudes to money. It’s a tough lesson to learn, for breadwinners to sit at home and not be able to earn an income. Nobody enjoys getting food from soup kitchens, depending on handouts. If you look after the little rands, the big rands will look after you, she believes.
“Financial management starts at home. We need to think about what we are teaching our children. The younger generation know only instant gratification; their parents indulge them, so they’ve learnt bad habits, which are hard to unlearn.”
It seems many are eager to unlearn: the institute’s webinars are popular and many already oversubscribed.
Bookings opened on Tuesday.
DATES AND TOPICS OF 'WAYS TO SAVE' WEBINAR SERIES
The South African Savings Institute (Sasi), in association with Absa, will focus on financial education this month, bringing together experts to provide insights on savings in the #waystosave webinar series.
- Wednesday, July 8, at 7pm: Building financial resilience in uncertain times.
With Prem Govender, the chairperson of Sasi and the Financial Services Consumer Education Foundation; Gerald Mwandiambira, Sasi’s acting chief executive and My Money author; Maya Fisher-French, award-winning personal finance journalist and author; Arabile Gumede, financial journalist, speaker and entrepreneur; Kristia van Heerden, the chief executive of Just One Lap and host of the Fat Wallet podcast; and Dr Sindi van Zyl, medical practitioner, broadcaster and social activist.
- Saturday, July 11, at 11am: Rebuilding your finances during Covid-19 and beyond.
With Maya Fisher-French.
- Saturday, July 18, at 11am: Ultimate savings hacks - the tools we should all use.
With Arabile Gumede and Gerald Mwandiambira.
- Saturday, July 25, at 11am: Know your money, grow your money - business and personal runways.
With Kristia van Heerden.
- Saturday, August 1, at 11am: Your financial health and well-being.
With Dr Sindi van Zyl and Dr Lesego Rametsi, the group head of health and wellness at Absa.
The webinars are free to the public. For more details and to register, click here!