Why are we so bad at saving money?
It’s not easy to save money – no matter what our financial circumstances may be, we never seem to have very much money in our checking account. We all know how crucial it is to put money away for future expenses and for unforeseen emergencies, yet putting our “money where our mouth is” is rarely as simple as popping a little extra into a savings account every month. In times of plenty we find ourselves splashing out on luxuries, when money is tight we need every penny for the essentials each month.
So exactly why are we so bad at saving? And how can South Africa tackle the problem and become a nation with money in the bank? Here are a few reasons and a few potential solutions…
- We’re not informed consumers
According to loan provider Wonga’s 2015 customer survey, there’s a distinct lack of financial awareness which needs to be tackled before we can become a nation of savvy spenders and savers. Only 43% of those polled knew what a credit report was, while 77% claimed not to look at fees or interest rates on credit applications. 67% did not know that they were entitled to a free credit report every year. Only 32% claimed to save every month. With low levels of financial knowledge, it’s little wonder that many South Africans struggle so save. By making ill-advised choices about things like credit, many find themselves struggling with debts and repayments, making saving next to impossible.
- The answer: Get financially literate. There are tonnes of resources – both online and offline – which can help you get a handle on your finances. Although based in the UK, charities like StepChange offer indispensable information and advice which can help you learn more about handling your money better.
- We’re procrastinators
It’s only too easy to put off essential but less-than-fun tasks like planning your finances. “I’ll do it tomorrow”, “I don’t need to start thinking about my pension yet”, “I’ll start saving later” are all common sentiments which put saving on hold. Yet the sooner we start saving, the more we are able to accumulate. Here’s a little illustration:
Save R100 every month for 25 years at an interest rate of 3% and you’ll put away R30,000, accumulating R44,712.28 with interest. Save the same monthly amount for just 15 years at the same interest rate and you’ll put away R18,000 yet accumulate just R22,743.01.
- The answer: Do it today. It might sound simple, but it is essential. Don’t leave your financial matters to go cold. Act on them now to benefit in the future. Having plans for things like house ownership, having kids or retirement can be the motivation you need to stop procrastinating, so start thinking of your future and start saving.
- Budgeting is boring
Nobody enjoys budgeting, but if you want to make real savings that will support you in the future, a clear budget which you stick to rigorously is essential. Even for individuals and families with little excess cash, a budget which ensures you’re putting away just a small amount each month could offer a valuable lifeline in future.
- The answer: Get budgeting. There are hundreds of helpful budgeting tools out there which will help you do this. Try an app like Mint or Goodbudget to get started.