NATIONAL SAVINGS MONTH: Consumers Encouraged to Consider Suitable Savings Options Instead of Giving in to Unsecured Debt

The South African Reserve Bank’s (SARB’s) Financial Stability Review (First Edition – May 2023) affirms that the rising interest rates, ongoing power outages, increasing costs of essential goods, and high unemployment rate (also recently highlighted by Statistics South Africa) are putting immense pressure on families. But despite these consumer-related challenges, there is a growing demand for unsecured debt as the SARB report highlights a 9% year-on-year expansion during the fourth quarter of 2022, the fastest growth since 2019. CreditSmart Financial Services’ 2023 Financial Savvy Survey results can relate to the above insights shared and reveal 33% of respondents confirming their usage of credit cards for ‘every day and everything’ purchases, 32% said they have no extra money to put away, and 24% stated that the unsecured debt cycle is something they just cannot escape. The impact of the current economic situation is furthermore evident in the figures specified by the National Credit Regulator – NCR (Credit Bureau Monitor and Consumer Credit Market Report – December 2022). Over nine (9) million consumers reflect having impaired credit records and a 4-plus percent increase can be seen in credit applications compared to previous quarters’ statistics.

“The reality is that many consumers are compelled to spend money they don’t have or deplete their savings just to get by. Thus, leaving them vulnerable to unforeseen financial hardships in the future,”

confirms Wikus Olivier, managing director here at CreditSmart Financial Services.

“Hats off to the consumers dealing with our current reality as best as they can. Considering the overall picture, National Savings Month, observed in July, should take on a more encouraging tone as organisations need to emphasise the crucial need for consumers to know they are not alone in their situations. We should motivate and guide South Africans on how to reassess their budgets so that they can identify cost-cutting areas and strive to save even if it means starting with as little as R20. It is vital for individuals to take proactive steps and try at best to prioritise savings in whichever form, even while facing trying times,”

highlights Olivier.

The following saving-related considerations can help consumers push through tough financial times while getting into the habit of becoming resilient savvy savers:

1. You won’t “financially win” if you don’t have a budget. List your income versus expenditures and subtract your expenses from your income. Track your transactions and identify areas of overspending each month. If you don’t grasp your full financial picture, you won’t realise when your hard-earned money is being wasted.
2. Having a budget in place is vital and ensures you plan for your expenses. Remember also to eliminate non-essential costs (like takeaway meals or buying designer outfits). Why not try a no-luxury or no-impulsive spending freeze for the month? Say no to anything that isn’t a necessity.
3. Even while dealing with the annoying L-word, continue to play your part and manage your electricity expenses. Keep tabs on your actual meter readings and don’t rely on given estimates. Why not give the self-service online meter management system a try and make sure you don’t pay more than you should? A cost-saving tip if you are a prepaid customer: Purchase enough electricity units per single calendar month preferably at the beginning of each month.
4. Review subscriptions, memberships, and policies. Cancel those subscriptions and memberships you can live without or don’t use (magazine subscriptions or a gym membership). You can also consider other alternatives or share costs with family and friends (for example, an online streaming package). And don’t forget to review your insurance policies each year to see where you can save a bit extra.
5. Groceries are expensive –shop smart.
   1. Know what items cost and make sure you choose the best price before making a purchase. Plus, compare bulk versus single-item prices.
   1. Plan your homemade meals by making a shopping list and stick to it. Or, if you are making use of a trending prepared meal service, do the math and make sure the option or provider you choose is financially viable. 
   1. Avoid impulse buys during your outings – ask yourself: “Do I really need this?”
6. Explore second-hand options instead of buying new items. If it is a need – think of hand-me-downs from family members (especially baby or toddler clothes), online marketplaces, or garage sales. By the way, did you know the 25^th of August is secondhand wardrobe day? There is no shame in being frugal.
7. Seek ways to increase your income. Supplement your earnings through freelancing or selling unused (or still-in-a-good-condition) items online. Tucking a few Rands away each month from your “little bit extra buffer” can be a lifesaver and your safety net during an emergency.
8. If boosting your income is not an option, you must try and lower your debt even more. If you are severely stressed and struggle to save money due to your unsecured (or secured) debt obligations – contact your (service or) credit providers to negotiate better terms on your instalments and to optimise your facilities. You’ll never win if you don’t try.
   1. If you have not had any luck with your negotiations with your creditors, or if you are already behind with payments and perhaps staring repossession in the face, seek a sustainable and regulated solution for you, the income receiver. For example, Debt Counselling is the recommended and legal option to get out of debt as highlighted by the NCR.
   1. Remember: A Debt Counsellor needs to be registered and should comply with the National Credit Act (The Act). The professional will negotiate or communicate on your behalf to help you get out of your credit mess and this is your opportunity to eliminate your debts (one by one) so that you can save money again in the future.

Despite South African households facing challenging economic conditions, National Savings Month serves as an opportunity to encourage consumers to consider suitable savings options rather than resorting to additional unsecured debt. Pushing through tough financial times and developing resilient saving habits may not be easy, but with determination and the right, one-foot-in-front-of-the-other strategies, individuals can improve their future fiscal situations.