Increase your savings rate and secure a future

According to World Bank statistics, South Africa’s population grew by 1.6% in 2016, far outstripping GDP growth of 0.3% and abysmally short of the 5.4% targeted by the National Development Plan (NDP) for driving back poverty and inequality.

And while 2017 figures were slightly more positive, SA’s economy is still expected to have grown around only 1% last year.

An economy that grows more slowly than the people it supports it, is unsustainable.

However, a culture of saving has been a significant contributor to economic success in other coun- tries.

A recent Goldman Sachs report predicted that in a few years from now, India won’t require a single dollar of foreign investment to fund its infrastructural improvements, thanks to a household savings rate which was as high as 39% of its GDP at the end of 2016.

By contrast, SA’s household savings rate as measured at the end of September 2017 was a pitiful 1.6% of GDP.

This is despite the fact that the average South African’s income, or GDP per capita, is three times higher than in India.

Additionally, SA’s household debt as a percentage of disposable income is currently a shocking 72.5%, which means that for every rand earned, nearly three quarters is spent on debt.

To break the cycle of generational debt and the low savings culture in SA, it’s imperative that financial literacy be entrenched from as young an age as possible, encouraging people to save more and spend less.

Here are some simple tips to begin saving:

Once you’ve learnt to cut out unnecessary spending by distinguishing between wants and needs, you’ll find you’re able to save substantially more each month.

Set a list of financial goals that you’d like to achieve, such as clearing all your debts, planning for retirement, creating an emergency fund or saving towards a home or car.

Set deadlines to achieve these goals and pursue them rigorously.

Buying life insurance is a form of investment in your family’s future, offering your dependents financial protection should the unexpected hit.

Paying yourself first means putting a set amount towards your savings aside as soon as you receive your salary, to avoid the temptation to spend.

Seek out a certified financial planner to guide you through the investment process, remembering that they’re likely better equipped to teach you about the financial world and offer investment advice.

Mbulelo Musa is a wealth advisor at BayHill Capital