Image: Pexels / Joslyn Pickens
National Savings Month encourages South Africans to develop healthier saving habits and build greater financial resilience. The initiative is important, but much of the advice assumes consumers have money to save – something that doesn’t reflect the financial reality facing many households
Also see: National Savings Month: Why financial resilience has never been more important
Research suggests that the primary constraint on saving for some households is limited disposable income, rather than not wanting to save. National Debt Counselling Association (NDCA) chairperson, René Moonsamy, says consumers face very different barriers to saving.
Broadly, there are: those who choose not to save, even though they could; those who have some capacity to save but prioritise other spending; and those who can’t save because all their income is devoted to debt repayments and essential expenses.
Expert weighs in
“Some people don’t save for behavioural reasons, some because of their lifestyle priorities and some because they can’t afford to. Providing information and advice on the importance of savings might help the first two groups, but not the third.
“Unlike poor savings habits, which can be improved by changing behaviour or spending priorities, this group suffers from a structural affordability problem that cannot be solved by encouraging them to save more.”
The problem isn’t financial discipline but negative cash flow. It occurs when essential monthly expenses such as bond, rent, vehicle finance, insurance, school fees, municipal service payments, and servicing debt exceed monthly income. Over time, this prevents any meaningful financial progress.
When this happens, Moonsamy explains, emergency savings are usually one of the first casualties. Unexpected expenses such as vehicle repairs, medical costs or essential household repairs are paid for by credit because consumers have not been able to build a financial buffer. The result is a cycle in which new borrowing leads to higher monthly repayments, leaving even less scope to save.
“Emergency savings are one of the foundations of financial resilience, but if debt repayments are absorbing most of your disposable income every month, it becomes extremely difficult to build that safety net.”
So, what can consumers do when they want to save but simply cannot afford to?
Finding a financial solution
Even households that have already made significant sacrifices can benefit from periodically reviewing their bank statements to identify cash-flow leakage caused by unnecessary recurring deductions. The objective shouldn’t be to find R200 to save, but to stop needing to borrow R200 next month.
Also see: National Savings Month: How families can build better money habits
Over a year, a R200 payment amounts to R2,400 that could have been directed at reducing expensive debt or starting an emergency fund. Over five years, the cumulative cost exceeds R12,000, before considering any investment returns or interest that money could have generated.
Moonsamy says that while reviewing current expenses is always worthwhile because every rand counts, households should also recognise when they’ve reached the point when further cutbacks will make little difference.
If most income is already committed to essentials and debt repayments, the priority shifts from trimming expenditure to restoring affordability. That may mean restructuring debt through a consolidation loan, negotiating with creditors, or applying for debt counselling.
“Attempting to build savings while relying on expensive credit to cover everyday living expenses leaves consumers trapped in a cycle of borrowing to make ends meet. That’s when more fundamental interventions, including debt counselling, can help.”
A registered debt counsellor will assess an applicant’s financial circumstances and, where appropriate, develop a structured repayment plan that enables them to meet their obligations more affordably while protecting their legal rights.
Moonsamy says that although debt counselling is a proven and effective way to deal with unmanageable debt, some people are resistant because they feel it is acknowledging a personal failure.
“In fact, the opposite is true. Seeking help early can prevent financial problems from escalating, protect assets from creditors and lay the foundation for long-term financial recovery. That is a responsible thing to do.
“Remember, financial resilience is not measured by how much you can save today, but by taking practical steps to put you on a path to a sustainable financial future.”
Also see: National Savings Month: Choose the right stokvel to maximise your savings
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