By Justin Asher
Saving has never been a priority for many South Africans but with the pandemic and impact of the Ukraine war resulting in financial uncertainty, one can hardly blame consumers for shifting saving even further down their priority list.
It’s difficult to budget for investments when things like fuel and general household expenses are steadily increasing, consuming larger and larger portions of expendable income. However, there are ways to set money aside despite the difficult financial landscape.
Barriers to saving
Although South Africa has a very poor savings culture, saving has become less of a priority for people worldwide. This is made worse by the effects of Covid on the economy and the rising cost of living, especially since the past fuel price hike.
However, a recent study by Kantar has revealed that many South Africans want to save and that they are, in fact, aware of the importance of saving for a rainy day, but on top of dire economic circumstances, there are several barriers keeping them from doing so regularly.
First, they find most savings options complex and don’t understand how a typical savings account can help them to grow their wealth.
The research also showed that investors, especially younger investors, are reluctant to put their money in formal investment vehicles as they find it cumbersome to gain access to their funds in times of need.
The younger generation of investors also have an appetite for risk and want their money to grow fast. As such, they are looking for more unconventional ways to invest, including shares, forex trading, and cryptocurrency, not necessarily offered by traditional banks and financial institutions.
Outside the box
The good news is that there has been a great deal of innovation in the fintech space in Africa and South Africa in particular, giving people alternatives to traditional modes of saving. In line with the worldwide post-Covid shift towards digitalisation, the options are designed for mobility and ease of use.
There is a move to "open banking", allowing third party users to create apps that leverage personal data. This will have an exponential impact on personal finance as it means that consumers are no longer reliant on traditional financial institutions.
This shift is a move in the right direction, breaking down barriers to saving for South Africans and offering them the opportunity to easily get into the habit of saving.
Starting small
Alongside fintech innovations, the concept of micro-investing allows people to invest even if they have limited funds.
It involves investing small amounts frequently, and there are several apps that enable micro investment in asset classes such as stocks, shares, and cryptocurrencies. It rules out brokerage fees and minimum investment amounts and has instantly opened the investment arena to a large band of the population who would not have had access to it otherwise.
Most micro-investment apps can be securely linked to any bank account, so it's an easy way for new investors to enter the market, or to keep saving and investing despite challenging times.
Many consumers might find this approach less overwhelming than budgeting to save large chunks of their income monthly. In the grand scheme of things, saving small amounts that add up is preferable to saving nothing. From this angle, micro-investment might just be the answer for South Africans to overcome their poor savings habits for good.
Justin Asher is head of strategy and marketing at upnup
IOL Business