SAVING IN A STATE OF DISASTER
Don’t let the climate of uncertainty and turbulence stop you from reaching your financial goals
The latest budget speech was delivered on the back of the national state of disaster announcement by President Cyril Ramaphosa. Now, while the department of finance works to strike a balance between competing national spending priorities, average South Africans are left grappling with crippling load-shedding, the unrelenting high cost of living and depressingly low levels of savings.
Caught in these economic crosswinds – and still in the wake of a globalpandemic – it is understandable why many would put their savings goals on hold. But that would be a mistake.
Saving has never mattered more than now
The average South Africanwas already struggling to save before the pandemic, load-shedding and state of disaster. Many live from month to month and are not building up any safety net for emergencies, much less saving for longer-term financial goals. For several years now, South Africans have been grouped among the worst savers in the world. This is a culture that needs to change.
Having access to savings, especially during turbulence, provides much-needed financial security. For example, as the country fights to literally keep the lights on, many households and businesses are looking for alternative power sources
especially with the promise of tax incentives. However, acquiring alternative energy demands considerable funds and it is those with discretionary savings who will be able to do so fast.
Various interventions, such astax incentives and savings awareness campaigns, have been implemented, but they’ve largely failed to lift the country’s level of savings. For example, the government introduced taxfree savings accounts in 2015, and while these received a lot of publicity, household savings rates have not improved much since then.
How do we get South Africa to save?
To cultivate a savings culture that can break the cycle of inter-generational debt, we first need better financial literacy. Knowledge ultimately translates to better decision-making and more sustainable approaches to money, preventing us from being vulnerable and unprepared when the next crisis hits.
The role of banks in promoting financial literacy and enhancing a savings culture cannot be emphasised enough. Furthermore,
commercialbanks have a direct responsibility to provide a range of deposit products and mechanisms with varying combinations of liquidity and rates of interest tailored to needs and preferences of different depositors.
An emergency fund that can cover household expenses in an immediate and unexpected financial crisis is a vital first step in saving. The emergencyfund should, ideally, be in a low-risk vehicle so the household can access it when financial markets are likely to be weak.
The money also needs to be available within days, if not immediately, without some form of penalty for early withdrawal. Last, but not least, the funds need to earn an above-inflation return.
An emergency fund is a vital first step in saving
TymeBank fuels savings
As financial conditions continue to tighten after aggressive interest rate hikes (the Bank has raised rates by a cumulative 375 basis points since November 2021), TymeBank offers some good news for savers who use the bank’s popular GoalSave.
Since February 1 2023, customers who get their regular income deposited into a TymeBank account can earn as much as 10% interest a year on the money in their GoalSave.
Wage earners, salaried workers, retired individuals, entrepreneurs and grant recipients are all eligible to receive 10% interest on the funds they transfer from their TymeBank EveryDay account into a GoalSave – as long as their regular earnings are deposited every month at the same time.
Even property owners who get rental income paid monthly into their account or pensioners who get their monthly pension payment are eligible.
GoalSave is a targeted savings tool accessed via TymeBank’s EveryDay account or EveryDayBusiness account that allows account holders to open up to 10 savings pockets and start earning 4% interest on their savings from day 1 to day 30, 5% from day 31 to 90 days, 6% from 90 days onwards, and 7% after 90 days.
You can then maximise your earnings with up to 10% interest if yoursalary gets paid into your TymeBank account and you give 10 days’ notice to withdraw – without any penalties. The interest rate is not linked to the repo rate and the overall deposit cannot exceed R100,000. There is no better savings product of this kind in the market.
TymeBank, one of the world’sfastest-growing digitalbanks, has a full commercialbanking licence and meets all the standards set by the Reserve Bank.