Consumers are encouraged to consider suitable savings options instead of giving in to unsecured debt to avoid becoming vulnerable to unforeseen financial hardship in the future. It is true that consumers are struggling with high inflation and interest rates, as well as other challenges such as rolling blackouts, but they are not alone.
The South African Reserve Bank’s Financial Stability Review issued in May affirms that the rising interest rates, ongoing power outages, increasing costs of essential goods and high unemployment rate put immense pressure on families.
However, despite these consumer-related challenges there is a growing demand for unsecured debt as the report highlights a 9% year-on-year expansion during the fourth quarter of 2022, the fastest growth since 2019.
The CreditSmart Financial Services’ 2023 Financial Savvy Survey results reveals that 33% of respondents confirmed they use their credit cards for ‘everyday and everything’ purchases, while 32% said they have no extra money to put away and 24% stated that the unsecured debt cycle is something they just cannot escape.
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The impact of the current economic situation is also evident in the figures specified by the National Credit Regulator that shows more than 9 million consumers have impaired credit records (with one or more accounts more than three months in arrears) and a 4% plus increase in credit applications compared to previous quarters’ statistics.
“The reality is that many consumers are compelled to spend money they do not have or deplete their savings just to get by,” Wikus Olivier, managing director at CreditSmart Financial Services, says.
“Hats off to the consumers dealing with our current reality as best as they can. Considering the overall picture, National Savings Month, observed in July, should take on a more encouraging tone as organisations need to emphasise the crucial need for consumers to know they are not alone in their situations.
“We should motivate and guide South Africans how to reassess their budgets so that they can identify cost-cutting areas and strive to save even if it means starting with as little as R20. It is vital for individuals to take proactive steps and try to prioritise savings in whichever form, even while facing trying times.”
Olivier has these tips for consumers to push through tough financial times while getting into the habit of becoming resilient and savvy savers:
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“Despite South African households facing challenging economic conditions, National Savings Month serves as an opportunity to encourage consumers to consider suitable savings options rather than resorting to additional unsecured debt. Pushing through tough financial times and developing resilient saving habits may not be easy, but with determination and the right, one-foot-in-front-of-the-other strategies, individuals can improve their future fiscal situations.”
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