The 2014 Finscope survey which measures and profiles the levels of access to and uptake of financial products/ services, indicated 78% of the SA adult population earned less than R2 000 per month, and due to the rising living cost, savings became difficult. Furthermore, only 44% of the individuals who earn salaries had any long-term savings or retirement products.
Olano Makhubela, director of finance and saving in National Treasury, said at the launch of July as National Savings Month, it is evident from this that SA needs to develop a culture of saving.
Due to these and many other reasons, National Treasury launched savings month in 2010, aimed at instilling a culture of saving and investment in all South Africans, as people should be able to save at least 10% of their earnings before taxes.
SA currently has 19 million credit active consumers, of which 50% have impaired credit records. Meaning they are three months in arrears on their payments, compared to 20% in 2012. According to a report by insurance company 1Life, what is more alarming is that 11 million of these consumers are described as over-indebted.
Over-indebtedness is an ever growing concern, if we consider the lack of savings or investments by SA consumers – which is not only leaving consumers with no money for a “rainy day” but is compounding the debt problem even further, 1Life said.
“These statistics are a serious concern, if we consider the financial constraints that impact a person’s ability to get out of debt … South Africans in these situations are not only concerned about their finances but are finding themselves in deepening levels of financial trouble with no clear solutions,” says Laurence Hillman, MD at 1Life.
According to 1Life, one of the biggest problems is that consumers are influenced by an “I want it now” culture and buy on credit instead of delaying gratification and purchasing only once they have the necessary funds.