Adding further to the difficultly will be the anticipated interest rate rising cycle over the next three years, which will make savings a tall order as consumers will be more financially stretched.
With the start of national savings month, Standard Bank’s head of deposits and payments Michael Daniels says South Africa has a high a high ratio of household debt to disposable income, which is currently sitting at “75% and starting to pick up”.
As the prime lending rate starts to increase, Daniels says disposable income and deposits might also be under pressure.
Since 1980, savings to GDP, which was nearing 35%, has seen a decline and is now below 15%.
More recently, the household income to debt ratio has remained above 50% says Daniels, adding that, naturally, when the prime interest rate increases, household debt also increases.
The Treasury has proposed a tax-free savings account to encourage household savings and retirement planning. The government incentive is expected to come into effect in March 2015.
About 12 million South Africans are in the unbanked category. Initiatives such as stokvels as a savings tool are on the rise and are increasingly popular.
People in the stokvels segment, with participants having monthly income of up to R8 000 per month, inherently want to save, as they want to buy houses and cars, says the bank’s Motlatsi Mkalala.
They also have the burden of taking care of extended families and it is through stokvels with diversified options that work in their favour.
Mkalala says stokvels that are managed by the big four banks are worth R4 billion.
Standard Bank advises consumers to start saving at least 10% of their salary and revise the percentage as their salary increases.