South Africa is burdened with the issue of having a non-existent savings culture. The youth - those under the age of 35 - have been weighed down by the inability to save and due to the fact that they constitute 77% of the population, the growth and development of South Africa’s economy is impacted.
According to Ian Wason of DebtBusters, “67% of South Africans are not saving and are unable to benefit the economy and contribute to the pool of investment capital.” But the topic in question is, why are the youth of South Africa not saving?
Elizabeth Lwanga-Nanziri, CEO of the South African Savings Institute (SASI), says “the inability to save and the consumer debt crisis South Africa is currently faced with, are intertwined and can be largely attributed to the gap in financial knowledge. Knowing when to take advantage of opportunities is crucial, as much as knowing one’s rights and responsibilities towards credit.”
South African youth lack both the means and the knowledge to save. Due to the ramifications of Apartheid and other inequalities burdening South Africans, the youth have not only faced difficulties with gaining access to formal savings and investment mechanisms, but they have also not been taught and educated on how to effectively work towards financial independence.
Elizabeth adds that, “there is a culture of consumerism and instant gratification which compromises savings in South Africa. Schools, family members, employers and even credit providers, have not delivered adequate guidance and financial literacy to equip the youth of South Africa to save by postponing consumption.
"If South Africa’s youth constitute the majority of the population and 70% are unemployed, what does the future hold? We need to recognise the potential role of the youth in the development of an economy. We want to encourage the youth to take advantage of opportunities that are potential avenues for generating financial resources for use in the event of an emergency, for education and most importantly, for retirement. It is vital that South Africans invest in financial knowledge and thus pave a way towards financial freedom.”
Need debt counselling or consolidation?
Explore DebtBusters' solutions for reducing your interest rates and unlocking cash.Find out more
Wason agrees that the inability to save goes hand in hand with accruing debt. “South Africans, who are unable to generate savings, do not have funds to fall back on in unforeseen circumstances and as a result, they borrow. Once over-indebted, they are subjected to more borrowing to repay existing debt and to meet day-to-day obligations, leading to a debt-trap”.
He adds that, “South Africans are simply not saving because they cannot afford to and are required to use their funds in order to pay for other things, including the outstanding debt. The average age of DebtBusters clients successfully entered into the debt counselling process is 34 years old. If you have debt when you are young, you cannot save for retirement. 33% of South Africans are still in debt after they retire.”
According to a recent survey, the recommended age to start saving is 23 years old, but only 56% of employed South Africans start to save at the age of 28. In order to make sure you retire comfortably, after working for ten years, you need to have saved twice your annual salary.
Thus, if you start working at the age of 20 years old, by the time you reach 30, you need to have saved twice your annual salary. After working for 20 years, you need to have saved 4 times your annual salary and after working for 30 years, you need to have saved 7 times your annual salary.
“Start saving today and help South Africa overcome its economic and social challenges”, advises Ian Wason.