Cape Town - Reducing indebtedness and improving savings in South Africa is a major socio-economic challenge, warned MD of Old Mutual’s Mass and Foundation Cluster Clarence Nethengwe. The metro working population spends an average of 19% of their salaries on paying back debt, according to the 2017 Old Mutual Savings & Investment Monitor.
The National Credit Monitor found that only 48% of the 24 million credit active consumers in the country were up to date with their credit repayments in the first quarter of 2017.The statistics, said Nethengwe, show that South Africans continue to be big borrowers and poor savers. "Although these bad money habits are fuelled by the current economic environment and rising living costs, it is a lack of financial knowledge that entrenches them," explained Nethengwe. He said the financial services sector has an important role to play in helping to build a society that understands the importance of financial planning and commitment. "While most South Africans know there is a connection between education and long-term prosperity, too few make the connection between savings and wealth creation," said Nethengwe.
He said encouraging more responsible and informed decision-making not only benefits individuals, but also boosts the prosperity and financial stability of the whole nation. "Healthy, financially stable economies are built largely on the savings of individuals. "Strong national savings help to finance national development projects and reduce South Africa’s dependency on foreign investment," explained Nethengwe. He said concepts such as compound interest need to be taught from a young age, to help counteract the celebrity-driven allure of conspicuous consumption.
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