Many resort to debt due to lack of emergency cash savings
29% of emerging high-income South Africans don't have emergency savings
South Africa’s tough economic conditions have left many consumers struggling to build emergency cash savings. According to Standard Bank data, more than half (52%) of entry level private banking clients have less than one month of their salary saved in immediately accessible cash savings available, to use in the event of unforeseen circumstances such as retrenchments or urgent medical procedures. Without the savings, many have had to resort to debt, eroding their ability to start building wealth over the long term.
In its analysis Standard Bank compared the value of cash savings (accessible within 24 hours) in the Prestige and entry-level Private Banking client bases, to their monthly salaries and fixed expenses. Of Standard Bank’s Prestige client base – those earning between R25,000 and R58,000 a month – nearly one in three (29%) had no accessible emergency savings.
In the higher income bracket, individuals earning between R700,000 and R1 million annually, over a third had no emergency savings at all, with 45% having savings that would last less than a month.
“The data shows that the ability to build adequate cash saving for use in an emergency, is not only dependent on earning a higher income” says Doret Jooste Head of Money Management and Advisory at Standard Bank. “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”, Jooste adds.
Why is this so important?
“Having emergency savings helps you avoid taking unnecessary and usually expensive short-term debt when you need to cover an urgent expense,” says Jooste. “It also helps you stick to your plan when investing for the longer-term goals, such as for your kids’ education or retirement. Instead of having to divert your longer-term investments to cover unexpected expenses that pop up in the short run, accessible emergency savings allow you to stick to your financial goals and long-term plan to realise important goals and build wealth,” Jooste continues.
So, if it’s not about just earning more income, what could help people have adequate emergency savings?
Valuable advise
“Having three months’ worth of salary saved may sound like a large amount, but it can be built over time. For example, first aim to cover your fixed expenses for one month with your savings. Then gradually start building it up from there,” says Bridgette Kruger, Standard Bank’s Head of Private Banking in SA.
