Research shows South African value saving but can’t afford to do it

While South Africans have faced enormous financial pressures in the last few years, research suggests they still want to save a portion of their earnings for a rainy day.

Nedbank released its Segment Tracker research in July, which highlighted that people have a strong desire to secure their financial futures through savings.

Vanesha Palani, Executive: Financial Management at Nedbank, says while people do value saving, there is not enough being saved for the long-term.

Most of the respondents in the survey said they have a basic savings account, but less than half of the respondents use more structured, long-term savings and investment products.

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Palani says it is concerning that many of the respondents do not have a retirement annuity or provident fund. The findings contained in the survey show that there is an understanding among South Africans about the importance of saving, however, there is a difficulty of transitioning from basic savings to long-term financial planning.

She says the findings can be viewed as a challenge and an advantage, as financial institutions can provide the necessary tools for the transition from basic to long-term savings.

As most people have established positive short-term saving habits, it will be easier for them to get used to the long-term saving habit. “People are more likely to explore and commit to longer-term savings and then go on to investment options like retirement annuities and unit trusts.”

Standard Bank says its own data also shows that South Africans have a lack of long-term savings.

It says 29% of people who earn between R25 000 and R58 000 per month do not have accessible emergency savings. The analysis is made with comparison of savings available within 24 hours, to their monthly salaries and fixed expenses.

While 45% of those who earn between R700 000 and R1 million per annum have savings that would last them less than a month.

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Doret Jooste Head of Money Management and Advisory at Standard Bank says without savings, many have had to resort to debt, eroding their ability to start building wealth over the long term. “Having cash savings on hand is the cornerstone of healthy money management and likely the most important thing to prioritise when you want to start building your wealth.”

The importance of having emergency savings can help one avoid taking unnecessary and expensive short-term debt when there is something that needs to be covered urgently. “It also helps one stick to a plan when investing for the longer-term goals, such as for kids’ education or retirement.”