Credit or TFSA to pay for wedding?
I’ve been saving into a tax-free savings account (TFSA) for three years. I am getting married, and I want to use these savings to cover the costs. Is this a good idea? I may need to use credit to fund my wedding instead, because I have only about R5 000 saved in a unit trust account, separate to my taxfree savings.
Name withheld
SOUTH African consumers are struggling with the spiralling costs of goods and services across the board: electricity, water, rates, transport, fuel, food, rent, school fees, school clothes, shoes, stationery, scholar transport, insurance costs, debt servicing costs, data and airtime costs. They are essentially powerless in the face of this price onslaught.
Conditions in households have worsened with the Covid-19. Jobs have been lost, wages cut, and money must spread further.
Government agencies, municipalities, public associations and businesses are preparing to increase the costs of goods and services they provide. Each entity sets its tariff based on its own calculation of the revenue it needs. They also set their tariff increases in a vacuum, not considering the combined impact of price hikes on consumers.
By allowing each entity to increase its tariffs in a vacuum, the state is not able to protect us from the combined effect of these hikes. The government does not mediate in any substantial way to keep household expenses down. Instead, it expects the instrument of the Consumer Price Index (CPI) to intercede. This does not work. Annual wage adjustments are not keeping up with the cost of household expenses. Workers are getting poorer.
The CPI is a product of South Africa’s extreme wage and income inequality. The CPI weighting is skewed towards big spenders. The spending patterns and proportions of workers on low incomes get engulfed by this inequality and essentially get weighted out of the basket.
The CPI is not able to accurately reflect inflation experienced by lowpaid workers. The CPI weights public transport at 2.3%, electricity at 3.8% and food at 17.24% whereas most households spend nearly 100% of their wage on these three expenses and must borrow money to make up for the wage shortfall.
The CPI tells us what inflation was in the past whereas, when setting wage adjustments, we should project forward to what goods and services will cost in the coming year (specifically for low-paid workers).
Headline Inflation has averaged 3.15%. Annual wage adjustments for this year will be in the region of 3 to 4.5% – far below the inflation rate experienced by the majority of South Africans. By not ensuring that wages are adjusted in line with the increases of expenses for most households, the state fails us a second time.
Families are desperate, hungry and angry. The escalations in costs without a commensurate increase in wages and no jobs are creating the context for revolution.