South Africa has one of the worst savings rates in the world.

Floris Slabbert, National Sales Manager at Ecsponent Financial Services, is of the opinion that South Africans must remain disciplined in fostering a culture of saving. According to him this is especially important in the present challenging economic environment.

“South Africans often do not understand the importance of short-, medium- and long-term financial planning. This may be due to low levels of financial literacy and as a result the country has one of the worst savings rates in the world.

“In fact, the latest data from the Investec GIBS (Gordon Institute of Business Science) Savings Index actually shows that we are moving backwards and that South Africa’s savings are at a 20-year low point. A score of 100 is considered a ‘savings pass mark,’ but we scored just 63 in the last quarter of 2015.

“With household expenses on the rise it is likely that many more consumers will, unfortunately, abandon their saving initiatives in an effort to stretch their disposable monthly income,” Slabbert said.

According to experts, the first step on the road to saving is drawing up a budget in order to evaluate and eliminate unnecessary expenditures. “The first thing you should do is allocate a few hours every month toward creating a budget in an effort to evaluate what exactly you are spending money on. Fixed expenses such as rent, insurance and car loans are priority expenses and you need to ensure that you can first pay these expenses before spending money on unnecessary items such as clothing and gadgets,” says Motshabi Nomvethe, Technical Marketing Specialist at PPS.

“A budget allows an individual to evaluate and identify areas to cut down on unnecessary spending. The cost of buying lunch, coffee or going out frequently can accumulate quite quickly without you even realising it.”

According to Lezanne Human of FNB a comprehensive budget, which includes your income, what you owe and your expenses, will give you a clear picture on where you can cut on everyday spending. “Savings should also be part of your personal budget. Once you have a budget it will be clear which debt you need to start paying off first and how much you can put towards your savings monthly.”

Slabbert says it is also important to distinguish the difference between wants and needs. “In a consumption-driven economy like ours, we’re bombarded by media telling us what we must own, look like, drive, and where we should live or what to do for fun. Put simply, a need is something you must have: A roof over your head, food on the table, healthcare, hygiene products, clothing etc. Our wants are usually closely linked to the needs and we want a big house, restaurant-quality food, branded clothing and fancy cars. Ridding yourself of debt is also a giant leap towards financial freedom.”

According to Slabbert, it is critical to determine saving goals. “Ultimately, the amount you save will depend on your savings goals and the life stage you find yourself in. Whatever your age, or whether you are saving for a deposit to buy property, your children’s education or your retirement, consider where you want to be in the next five to ten years.”