July 24, 2010
By Neesa Moodley-isaacs
Eighty percent of South Africans are saving either the same or less than they were saving last year, according to the Old Mutual Savings Monitor, which was released this week.
The study shows that wealthier people are saving less than last year and young people (18-39) are saving more than older people (44-59). Of those who are saving more this year, the preferred investments seem to be bank cash savings and stokvels (informal, communal savings schemes).
Crispin Sonn, the director of corporate affairs at Old Mutual, says South Africans are not saving more because they have too much medium- to long-term debt, such as property bonds, vehicle finance and personal loans. "On the positive side, we are servicing our debt, albeit at the minimum levels of repayment," he says.
More than 80 percent of consumers are paying the minimum repayment or less on their home loans. However, debt does not appear to be the main inhibiting factor to saving. Consumers with no debt are saving at the same low rate as those who have home loans, vehicle finance, personal loans and/or store or credit cards. Sonn says the reason is that the "potential additional saving" that debt-free consumers could be making is going into living expenses.
"Debt is necessary for the accumulation of assets. The results of the survey show that debt is not the problem - too much debt is," he says.
If you are single, you are likely to be saving more than if you had a family, because you don't have to pay for a family home, high household expenses and children's education costs.
According to the study, consumers who actively plan their finances five to 10 years ahead seem to be saving more than their peers of the same age, despite their debt.
The majority of consumers who plan their finances in advance are aged 40 and older and are high earners with a high level of education.
According to the study, some factors that have had a positive influence on savings include:
Low interest rates, which allow you to pay back more debt, reducing your debt burden and easing your cash flow;
Lower inflation; and
Negotiated wage increases, such as the above-inflation increases at Eskom after staff threatened to strike.
Negative factors include:
High unemployment; and
Possible higher consumer spending during the World Cup.
The Savings Monitor, launched last year, is a bi-annual survey of the savings behaviour and of urban South Africans. It's done by independent research house Peppercorn Research on behalf of Old Mutual .
  
 
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