South African consumers continue to face tough economic conditions as new data from Standard Banked shows South Africans are finding it harder and harder to save at least one month’s salary for a rainy day.
The latest data from the bank notes over half (52%) of their entry-level private banking clients have less than one month of their salary saved.
The bank says that data showed that when it comes to unforeseen circumstances such as retrenchments or urgent medical procedures, most of these clients simply do not have the funds to address these issues.
“Without the savings, many have had to resort to debt, eroding their ability to start building wealth over the long term,” the bank has said.
Looking specifically at their Prestige and entry-level Private Banking client bases, the research found that 29% of South Africans earning between R25,000 and R58,000 a month had no accessible emergency savings.
The bank said that in the higher income bracket, individuals earning between R700,000 and R1 million annually, over a third had no emergency savings at all, with 45% having savings that would last less than a month.
Essentially the data shows that the ability to build adequate cash savings for use in an emergency is not only dependent on earning a higher income, Doret Jooste, Head of Money Management and Advisory at Standard Bank says.
“Having cash savings on hand is the cornerstone of healthy money management and likely the most important thing to prioritise when you want to start building your wealth,” Jooste said.
Have three months salary saved up
Bridgette Kruger, Standard Bank’s Head of Private Banking in SA advised that South Africans need to have at least three months’ worth of salary saved up.
“Having three months’ worth of salary saved may sound like a large amount, but it can be built over time. For example, first aim to cover your fixed expenses for one month with your savings. Then gradually start building it up from there,” Kruger noted.
More bad news
South Africans will be looking to the South African Reserve Bank (Sarb) this week as the bank’s monetary policy committee (MPC) will be meeting to discuss a possible interest rate decision.
The Monetary Police Committee will announce a possible rate cut on Thursday.
The repo rate is currently at 8.25% and the prime lending rate is at 11.75%.
The reality is that several economists have noted that the Reserve Bank will keep interest rates at the same figure.
Lara Hodes, an economist at Investec said in a financial note that the Sarb will keep rates on hold this week at 8.25%.
“We continue to pencil in a start to the easing cycle in November, although the risk is that the South African interest rate cutting cycle only begins in 2025,” she said.
The Bank of America South Africa Watch said in a recent report that the MPC will probably keep the repo rate fixed and there will be no cut.
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