Ina Opperman

By Ina Opperman

Business Journalist

Creative ways to save money in challenging economic times

If the past few years have taught us anything it is the importance of saving for emergencies, but who has money to save?

In challenging economic times, creative ways to save money are needed to plan for life’s unexpected eventualities. However, alarming statistics show that South Africans still struggle to save while it is getting increasingly difficult for consumers to make their salaries last until the last payday.

According to Deloitte South Africa’s Investment Management Outlook for 2023, the country’s savings rate stands at a mere 0.5% due to the harsh realities of South Africa’s constrained economy, where essential expenses such as housing, education, healthcare and transport costs continue to increase along with the burden of high debt levels.

This situation is made even worse by factors such as low wages, limited financial education and a lack of awareness regarding the significance of putting away money and long-term financial planning.

The report compared South Africa’s savings rate to that of other countries, including emerging market peers Brazil and India, as well as more developed economies such as the US, EU and South Korea. The US has a savings rate of 12.4%, the EU 11% and South Korea 13.7%. Even South Africa’s emerging market counterparts, Brazil and India, have higher rates of 16.9% and 10.8% respectively.

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Saving as a safety net

Consumers must see saving as a safety net, says Graeme Young, head of private equity and mergers and acquisitions at Hollard’s Group. “Saving is essential as it provides a financial safety net and instils a sense of security in the face of unforeseen emergencies or unexpected expenses. Putting money away for emergencies enables individuals and families to easily access funds to cover crucial needs such as medical expenses, car repairs, or home maintenance.”

If you have savings, you can avoid falling into debt or relying on high-interest credit options during times of financial strain, he says. “Putting money away promotes long-term financial stability and allows individuals to accumulate funds for significant life events, such as buying a home, starting a business, or funding education.”

You can harness the power of compounding interest by regular contributions, even in small amounts and watch your savings grow over time. Having a nest egg also provides the opportunity to create a better future, including better opportunities to retire comfortably and leave a lasting legacy for future generations, Young says.

“While the impact of putting money away cannot be overstated, it can be challenging to save in economically challenging circumstances, where consumers may need to adjust and find innovative strategies to enable them to save to safeguard their financial well-being.

Some South Africans, particularly those with limited financial literacy or access to traditional banking services, may rely less on formal savings accounts or investment products and instead choose informal methods or keep cash at home.

“In certain communities, informal savings mechanisms, such as stokvels or saving clubs, are widespread. These informal groups allow individuals to pool their resources and save collectively, fostering a sense of community support and encouraging regular saving habits.”

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Insurance can help your savings?

However, Young says, there are several insurance products that can help South Africans to build their savings by enabling them to redirect savings from informal and at times unsafe platforms to more formal and safer channels. Several insurance cover options can be explored to safeguard against unforeseen circumstances at an affordable cost.

  • Health insurance is one of the most crucial products that consumers can buy to safeguard themselves against health-related risks because medical expenses can impose a significant financial burden on consumers. If you have a health insurance policy you can manage healthcare costs better and safeguard your savings from unexpected medical bills.
  • Life insurance can provide financial protection for your loved ones in the event of the passing of a breadwinner. Life insurance ensures that beneficiaries receive a lump sum or regular payments, which can help replace lost income and support their financial stability.
  • If you become disabled or unable to work, disability insurance offers income replacement that can also help to preserve your savings by ensuring a continued stream of income to cover your living expenses and other financial obligations.
  • Homeowners’ or renters’ insurance safeguards your property and belongings against damage or loss caused by unforeseen events such as fire, theft, or natural disasters. If you have adequate property insurance coverage you can prevent substantial financial setbacks.
  • Vehicle insurance protects against financial losses due to accidents, theft, or damage to your vehicle. It can help safeguard your savings from repair costs, liability claims, or legal expenses.

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Retirement saving

Young says it is also very important to also consider retirement savings options like retirement annuities or pension plans that offer tax advantages and long-term savings growth to help you build a retirement nest egg and secure your financial future.

“When you choose insurance policies, it is important to assess your needs, review coverage options and consider affordability. Seek advice from insurance professionals to ensure you choose policies that provide sufficient protection without straining your budget.”

He says it is also important to use that important consumer tool of comparing prices. “During challenging economic times, it is imperative to compare prices on essential expenses such as insurance, utilities, or groceries. By diligently comparing prices and exploring cost-saving options, you can make informed decisions that can help you save money.

Young says sometimes this may require you to switch from your current insurance policy to a more affordable insurance policy or actively negotiate better rates with service providers. These proactive measures can significantly contribute to managing your finances effectively and weathering tough economic situations and in turn improve your financial resilience.”

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