Em­ploy­ers can help to foster a cul­ture of sav­ing

The Star Early Edition - - BUSINESS NEWS -

SOUTH Africans of­ten take more in­ter­est in how to re­duce debt and save dur­ing Na­tional Sav­ings Month in July. The re­al­ity is that South Africans do not save enough, and this is par­tic­u­larly the case among those who can­not af­ford to put away some money ev­ery month, be­cause they spend a dis­pro­por­tion­ate amount of their in­come on food, travel, rent and on pay­ing off over­whelm­ing amounts of debt.

Sav­ing should not be a onemonth fo­cus cam­paign. In light of the coun­try’s high level of in­debt­ed­ness and low eco­nomic growth, sav­ing should re­ceive our full at­ten­tion through­out the year.

South African house­holds have been sav­ing less and less each year, tend­ing to bor­row rather than save. This trend means that the coun­try’s na­tional sav­ings stock, which is ac­cu­mu­lated from house­hold sav­ings, has been de­creas­ing for the past 35 years, ac­cord­ing to the As­so­ci­a­tion for Sav­ings & In­vest­ment South Africa.

Sta­tis­tics from the World Bank and the South African Re­serve Bank show that res­i­den­tial hous­ing as a sav­ings as­set ac­counts for only 24 per­cent of the house­hold bal­ance sheet, which is con­sid­ered low for a de­vel­op­ing na­tion.

Sav­ing is not some­thing any of us can tackle alone; it takes con­certed, all-en­com­pass­ing part­ner­ships. This is why we at Absa went into part­ner­ship with the South African Sav­ings In­sti­tute.

Some may con­clude that the low level of sav­ing is caused by an un­der­de­vel­oped cul­ture of sav­ing. In re­al­ity, the rea­sons are far more com­plex. In many cases, peo­ple can­not save be­cause their cir­cum­stances do not per­mit it, and stub­born un­em­ploy­ment and the ris­ing cost of liv­ing – made worse by his­tor­i­cal spa­tial de­vel­op­ment pat­terns – mean that the av­er­age lower-in­come house­hold faces far greater pres­sures than many of us imag­ine.

In ad­di­tion, too lit­tle debt goes into buy­ing as­sets that ap­pre­ci­ate over the long term, such as prop­erty.

Peo­ple of­ten turn to debt be­cause it al­lows them to ac­quire the things to which they as­pire.

Debt is a use­ful tool that can be used to shape the pros­per­ity, but only if it is used cor­rectly. When it is used in­cor­rectly, debt can hin­der progress, be­cause peo­ple spend too much pay­ing back the money.

As the coun­try grap­ples with ways to cre­ate in­clu­sive eco­nomic growth, the fi­nan­cial pres­sure on house­holds is set to rise. South Africans are hav­ing to learn quickly how to do more with less. That means that fi­nan­cial dis­ci­pline will be­come cru­cial as fam­i­lies deal with the ris­ing cost of liv­ing.

Over-in­debt­ed­ness has wors­ened with the slow­down in eco­nomic growth and in­creas­ing un­em­ploy­ment lev­els.

Records held by the Na­tional Credit Reg­u­la­tor show that at the end of June last year 9.67 mil­lion peo­ple, or about 40 per­cent of the 24.08m credit-ac­tive con­sumers in South Africa, had im­paired credit records and were lit­er­ally drown­ing in debt.

Some of this debt is be­ing in­curred with the no­blest of in­ten­tions. Par­ents are in­creas­ingly spend­ing be­yond their means to se­cure the very best

The big­gest pre­dic­tor of fi­nan­cial well-be­ing is how long a sav­ings buf­fer will last.

for their chil­dren, but chil­dren of­ten be­come the vic­tims of the toxic cy­cle of debt and low sav­ings lev­els.

Absa is com­mit­ted to achiev­ing bal­anced and in­clu­sive growth through un­lock­ing so­lu­tions to some of the chal­lenges fac­ing our coun­try. We have what some may con­sider a con­ser­va­tive lend­ing pol­icy. We have this pol­icy be­cause we do not want to see South Africans drown­ing in debt. Our Shared Growth strat­egy is an em­bod­i­ment of this com­mit­ment; we work hard to im­prove ac­cess to fi­nan­cial ser­vices, and we pro­vide ed­u­ca­tion to our staff on how to han­dle debt ef­fec­tively so that sav­ing can be­come a re­al­ity.

There is a way out of the debt spi­ral. Pay­ing off debt once and for all and con­vert­ing the money that was spent on ser­vic­ing debt into sav­ings is not nearly as over­whelm­ing as peo­ple may be­lieve. All it of­ten re­quires are small be­havioural changes. But the re­spon­si­bil­ity for this, and for cre­at­ing fi­nan­cial well-be­ing, is a shared one.

We see a role not just for in­di­vid­u­als and fi­nan­cial ser­vices providers but also for em­ploy­ers and hu­man re­sources pro­fes­sion­als in mak­ing sure that em­ploy­ees have enough sav­ings to with­stand un­ex­pected events and pro­vide ad­e­quately for their fu­ture.

Em­ploy­ers have a sig­nif­i­cant role to play in guid­ing em­ploy­ees to make the right choices to se­cure their fi­nan­cial well-be­ing. Hu­man re­sources pro­fes­sion­als should be rec­om­mend­ing small but sig­nif­i­cant tweaks to em­ploy­ees, such as reg­u­larly re­view­ing and ad­just­ing their re­tire­ment fund con­tri­bu­tions. They should also ed­u­cate em­ploy­ees on how to start build­ing a sav­ings buf­fer in case things go wrong. Re­search has shown that the big­gest pre­dic­tor of fi­nan­cial well-be­ing is how long a sav­ings buf­fer will last.

This is why we have part­nered with Gen­e­sis An­a­lyt­ics to con­sider fi­nan­cial well-be­ing as a driver of hap­pi­ness. This part­ner­ship will re­sult in “hap­pi­ness in­sights” to show how con­sumers’ hap­pi­ness and pro­duc­tiv­ity lev­els are tied to sav­ing, and how few con­sumers have a sav­ings buf­fer to meet sud­den, ur­gent ex­penses.

Draw­ing on find­ings from the field of be­havioural eco­nomics, our re­search high­lights how small changes in be­hav­iour can pro­mote re­silience and build fi­nan­cial well-be­ing and hap­pi­ness.

By help­ing peo­ple to face their fi­nan­cial fears and in­ves­ti­gate al­ter­na­tive sav­ings so­lu­tions, we can as­sist them to pave the way to hap­pi­ness, what­ever their bank bal­ance says.

Sazini Mo­japelo Group head of cit­i­zen­ship at Bar­clays Africa

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