Is South Africa facing a crisis of low savings? A recent report indicates that our national savings rate is close to 1% – a fraction of what it should be.
While local banks struggle to attract deposits, the number of opportunities to access credit has grown significantly over the past few years. Despite a brief slowdown in spending following the 2008 financial crisis, South African consumers have largely returned to their old spending habits, racking up ever-increasing debts while their savings dwindle.
While consumer credit may give us access to goods immediately, having zero or low savings can spell disaster for anyone who becomes unemployed, disabled, or incurs unexpected expenses. If you’d like to get your savings up to speed, I’ve compiled a list of strategies you can use to secure yourself financially when the unexpected happens:
Short-Term Savings
Short-term savings are essential during those times when you find yourself in a tight spot. Whether your car needs a service or you need to make an emergency payment, you’ll be happy to have short-term savings to draw on.
Your short-term savings can be kept in a savings account or money market account. With low interest rates at the moment, a money market account may help to preserve the value of your savings better than a traditional savings account.
Longer Term Investing
A 10 year investment plan, which usually takes the form of unit trusts, is an excellent way of saving toward major financial goals like purchasing a secondary property or providing for your children’s tertiary education.
There are several types of unit trusts which you can invest in and they include any of the following asset classes:
- Cash
- Bonds
- Property
- Equity
If you’re in any doubt about the type of investment to choose or how much you should be investing, I will be happy to assist you in tailoring your investments to your individual needs.
Retirement Planning
A retirement annuity is an excellent choice because it allows you to invest for your retirement without paying unnecessary taxes on your investment. By planning and contributing to your retirement annuity as soon as possible, you’ll retire comfortably with peace of mind.