The point made in this article, in “Moneyweb Today”, is that if you spend less on something it doesn’t mean you have automatically saved.
Spending less is not saving
The premise is obvious. South Africa’s savings rate is abysmal and we need to do something to fix that.
However, many of the messages coming from financial services companies this year have not focused on the country’s savings habits. They have rather been about our spending habits.
Sanlam, for instance, has collaborated with rapper Cassper Nyovest and actress Pearl Thusi on a project called #ConspicuousSaving. The two, who are usually known for their big spending, have been posting on social media about doing things like home facials, clothes swapping or a haircut at a roadside barber to save money.
At a media luncheon in Cape Town on Thursday, Liberty also looked at ways in which South Africans might try to moderate their spending. Based on the findings of a survey conducted by Alltold, Liberty showed where consumers look to cut back to make their money go further.
The primary lesson from the study, entitled The Frugality Report, was that South Africans don’t like to compromise on their lifestyles. Even when they are spending less, they don’t want to cut anything out. They just look for more cost-effective ways of doing the same things.
This suggests that South Africans are probably too attached to the kinds of lifestyles they want to lead. They aren’t willing to seriously assess what they spend their money on and how much of it is really necessary.
In isolation, there is nothing wrong with highlighting these issues and questioning our spending habits. The first step towards financial freedom is always spending less than you earn.
However, it is only that – a first step. Only encouraging South Africans not to spend so much doesn’t really address the key issue of savings month, which is how to get more people to save more of their income.
Even if one of Thusi’s Twitter followers does heed the message and saves money by doing her own nails, buying second-hand clothes and turning down the temptation to buy a new handbag, what then? What does she do with the extra money that she now has?
This is where the financial services industry itself needs to do some serious introspection. It is simply not doing enough to make it easy and cost-effective for South Africans to save and invest.
Even acknowledging that this is not a simple thing to do, it doesn’t feel like too many companies are really trying very hard. The level of innovation in building simple, appropriate and appealing products is poor.
Even some firms that already have options that could be used to attract first time investors don’t market them as such. For instance, the Stanlib Equity Fund may be the only unit trust in the country that accepts debit orders of just R50 per month, yet I am not aware of any advertising from the company that has ever centred on this fact.
Easy Equities is a rare exception trying to make investing exciting and accessible, but why has it remained an outlier? Why aren’t more companies looking at ways to do similar things?
Many of them will say that it’s not easy when faced with the amount of regulation involved, and there is truth to that. However, this is not insurmountable. There are already online platforms that allow an investor to complete, sign and submit all the documentation they need for an investmentment online and simply upload their Fica documentation. It’s a process that needn’t be burdensome on the consumer.
It is indisputable that the level of financial education in South Africa needs to improve. It is also clear that we need to reconsider our spending habits.
However, those things alone are still not going to be enough to really change our savings culture. For that to happen, there also needs to be reform in the financial services industry.
It cannot carry on doing the same things, offering the same products in the same way and simply expect South Africans to view them differently. To change perceptions, the offerings themselves have to change too.
And that is my challenge to financial services companies this savings month: Instead of just preaching to consumers about what we should be doing differently, how about some introspection about what you could be doing differently yourselves?