South Africans under 35 and women most likely to save

South Africans younger than 35 and women are the most likely to save according to a new survey that also indicates that South African save against the odds. This is good news as local consumers generally have a reputation as bad savers.

According to the TymeBank Rainy Day Report based on an online survey of 1 475 consumers (mostly TymeBank customers), a remarkable 83% of respondents said they put money away.

“The average salary of a young person is R12 000 per month or R144 000 per year and this must cover housing, food, transport, data and potentially assist family members. Insights from TymeBank’s depositor base tell us that just under 40% of customers between the ages of 26 and 35 use a fixed deposit account to save, along with 29% of those between the ages of 16 and 25,” Greg Illgner, chief strategy officer at TymeBank says.

The fact that customers under 35 put money away the most is extremely encouraging. Starting early can make a significant difference to the amount you accumulate, given the power of compound interest, he says. The average amount TymeBank customers put into a fixed deposit is R10 000, while the largest amount to date was R4-million.

“This tells us that despite the economic headwinds, consumers are diligent about saving what they can afford. South Africans are often said to be resilient in the face of adversity.”  

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Using fixed deposit accounts

The majority of TymeBank customers who use fixed deposits are female (54%) because:

• More than 40% of South African women are single mothers and put money away in a fixed deposit account after they raised some capital to grow and for example save enough for their children’s education.
• Single mothers also have to rely on their own income for everything a family needs in the short and longer term.
• Women tend to live longer than men and therefore they have to plan for a longer period after retirement. This then also explains why more women tend to be worried about their savings strategies and plan better for their financial futures.

Illgner says when it comes to choosing a financial product, 26% of the respondents indicated they use a fixed deposit, compared to 55% who use an accessible savings tool, while 10% use a notice account and fewer than 10% use other channels.

“The disciplined behaviour of savers who choose to lock their money away for a fixed period to maximise the interest accrued, shows how savvy consumers are when it comes to using different products for different purposes, even when they may be under financial pressure.”

Among the savers, 23% of the respondents consistently save a portion of their income each month, while 60% put money away whenever they have extra cash. “The disciplined savers who set aside a regular percentage of their income every month (23%) deserve a shout-out for following the successful ‘pay yourself first’ savings strategy,” Illgner says.

“Building on this, once you accumulate a nice lump sum using a flexible savings tool like GoalSave, you can transfer it to a fixed deposit account and lock your funds away for a predetermined period, while earning a healthy amount of interest.”

His advice is to save what you can, build it up and then put it away for a rainy day using a fixed deposit account and repeat by starting another savings pocket, building it up and putting it away where it is safe, even from yourself. “It is a smart savings strategy for savvy consumers.”

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Many consumers save, but not enough

Laura du Preez, editor of Smart About Money, a consumer financial education website linked to the Association of Savings and Investment South Africa (ASISA), agrees. “As South Africans we are often told we have a terrible savings rate, but many of us save, just possibly not enough.

“However, it is encouraging that savings pockets, aided by digital tools that help customers work out how they can achieve their goals, appear to make a difference, especially among the digitally savvy under 35s.”

What do they put money away for? An overwhelming 44% of the respondents said they save for emergencies, followed by education at 17% and everyday expenses at 16%, while 14% save for a large purchase like a car. Only 5% save for retirement.

“It is most important to put money away for emergencies to provide financial relief when life happens: the geyser bursts, you need sudden dental work, or your car needs new parts. These are realities that happen without warning. Having access to some money to pay for these types of circumstances is beneficial,” says Illgner.

Du Preez adds that when we have emergencies covered and goals on our radar, the next big shift in South African thinking must be long-term savings for our older selves. “Many people think they will never retire or need to, but not preparing for a time when life or ill health may change their thinking. The ability to choose how much you want to work in your later years is key to your financial security,” she says.

The report also reveals that we tend to save at different times of the year. Most respondents (24%) said they started saving at the beginning of a new year, 14% save ahead of the holidays and only 12% save during the winter months.

“In such challenging times, it is key to have a stash of cash saved for those rainy day emergencies. At the same time, it is wise to put money away for those big goals, not forgetting retirement. We know money does not go as far as it used to, which is even more reason to save. The more prepared you are, the better you will weather the storms while saving for the future.”