(Newswire.net — June 24, 2019) — South Africa has one of the highest rates of personal debt on the planet. Although the average South African’s debt to household income ratio has dropped by around 15% over the past decade, debt still accounted for 71% of gross household income as of 2018.
While debt to household income figures improve, there’s also the question of South Africa’s personal saving practices. Saving continues to be low on the average South African’s to do list, with the country’s personal saving rate dropping to -0.5% in the fourth quarter of 2018. The country’s highest level of consumer saving occurred in 1978 when it reached 23.8%. Saving has steadily declined over the past five decades. In contrast, super-savers Switzerland have a 17.89% household saving rate, while mid-range savers Slovenia have a 6.75% rate. Only Finland, Latvia, Lithuania, Portugal and Greece saved less than South Africa in 2016.
“I want it now” culture
South Africa’s level of personal debt may be declining, but the average citizen is still struggling to save (or simply not doing so). A behaviour pattern which some commentators have blamed upon South Africa’s “I want it now” culture. Although unfair to tar every citizen with the same brush (and ignore the economic issues which drive many to spend beyond their budget and fail to save), there is some evidence that points to this trait.
In 2014 The Human Sciences Research Council found that 45% of South Africans claim not to be making any savings. 41% of respondents to the country-wide survey agreed: “I find it more satisfying to spend money than to save it for the long term”, while 28% agreed with the statement: “I tend to live for today and let tomorrow take care of itself”. Clearly, a “buy now, worry later” sentiment is present in South Africa – and it could be damaging many households’ financial futures.
“Save now, thrive later”
So how can South Africans start at address this short termist approach to personal finance? Education is surely at the heart of nurturing a more responsible, “save now, thrive later” mentality which benefits both individuals and the country at large. Increasing knowledge of how saving and investing work is one step towards demonstrating the benefits of resisting the urge to spend. Supporting individuals as they develop better budgeting skills is another way to make saving seem more manageable.
Some organisations and financial companies are already taking steps to help their customers develop financial knowledge. Discovery Bank recently released a service which promised to reward customers who manage their money responsibly. Personal loan lender Wonga, meanwhile, is building online financial education resources to support customers.
For many people, however, information from private sources is not enough. Increasingly, those in the know are calling for better financial education in South Africa’s schools. Financial education is something every individual requires in order to manage their money wisely. These are skills which, if taught from a young age, could stand to beat the country’s “buy now, worry later” mentality – and benefit the country as a whole.