In order to save you need the ability as well as the willingness to do so, Rian le Roux, chief economist at Old Mutual Investment Group, told Fin24.

While there are many South Africans who simply do not have the means to save, there are many who has the ability to save, but lacking the willingness, he said.

“We are a consumer society and people want instant gratification, while saving is a longer term issue with a benefit only after 30 to 40 years,” explained Le Roux.

He warned that most people pay into a pension fund and assume that will give them a good retirement. In many cases, however, they discover a year or two before retirement that they do not have enough money in the fund. This then leads to a total collapse in their standard of living.

Le Roux said the solution lies in educating consumers for them to spot liabilities and prepare for these.

“Also, save as long as you can and start saving as soon as you can. When my twins were born I opened a fund for them and now they are about 20 years ahead of their peers in savings. The biggest present you can actually give yourself is to make your kids independent by educating them on saving,” said Le Roux.

“Many people say they cannot save, but then they have just been overseas or bought a luxury home or fancy car. An old saying of mine is that, just because you have money, it does not mean you can afford something.”

Increasing pressure

The proportion of household income used to service debt has increased from 12% in 2015 to 16% in 2016, according to an Old Mutual Personal Finance monitor.

This suggests that, when expenses exceed income, households are increasingly taking up loan offers and accessing credit lines, rather than curbing their spending. This shift was particularly noticeable among middle-income households, seriously hindering their ability to save and, therefore, diminishing the potential for medium to long-term wealth creation, cautioned Derick Ferreira, head of product management at Old Mutual Personal Finance.

With rising interest rates, the cost of debt is also growing, making high-interest, short-term debt such as credit cards and store accounts particularly expensive. Only 13% of South African households pay their credit cards off in full at the end of the month and only 6% of store card accounts are cleared monthly.

It is, therefore, key for consumers to understand the importance of developing better spending habits. They must understand their behaviour if they want to avoid overspending.

According to a report conducted on behalf of Old Mutual on consumer behaviour, South Africans should be aware of retail tactics that may lure them to spend more.

These could include ways to make you think you are paying less for something – for instance R3.99 compared to R4; 50% off specials on things you really don’t need; buy 3 or 2 and get 1 free deals to get you to spend more; music and even smells to encourage you to shop more; the “limited edition tactic; and impulse buying as you walk through isles.

“Be aware of the temptation corridor. Checkout aisles have been designed to tempt you and your kids with treats and sweets while you’re bored and waiting to pay – this is an impulse sales tactic,” explained Ferreira.

Stores also use layout science to push you to buy selected products.

“The (often more expensive) stock they’re trying to move will be displayed at eye level. Shopping centres and retailers also encourage you to bring the kids along, as research proves that parents spend 29% more when the kids are around,” he said.

“During tough times, the temptation to get further into debt is a challenge, but it’s during times like these that minimising debt and maximising savings should be made a priority.”

Tips for retail saving:

– Save 29% by not taking the kids along when you go shopping;
– Leave your credit cards behind and avoid impulse buys;
– Avoid “just popping into the shopping mall” that can easily get you into overspending;
– Wait 48 hours before buying. On larger purchases, think first about whether you really need it;
– Write a shopping list and stick to it;
– Buy needs not wants. 

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