Did you know that the country’s national savings rate rose from 14.2% in December 2020 to 18% in the first quarter of this year – the highest since 2010? According to the South African Reserve Bank, this reflects household spending patterns amid the uncertainty surrounding the Covid-19 pandemic.
Hennie Blignaut, account manager at payment platform [email protected], notes that this savings trend has also had an impact on debt repayments and insurance premium payment volumes, with the former increasing by 58% and the latter by 83% over the past 12 months. He explains some of the reasons for these increases and explains how South Africans can continue to save:
For many, the lockdowns induced by the pandemic have led to pay cuts at best and job losses at worst, undoubtedly waking people up to the fact that they need to save money if job levels are low. Tighter blockages are coming back, or if the country is hit by another crisis, like the protest action we have seen recently in parts of the country.
In terms of increasing debt repayments, most of them relate to overdue or overdue debt, much of which was amassed due to the tougher foreclosure levels, while people prioritized purchasing food and paying essential bills. Failure to repay debt or leave debt in arrears longer may result in interest and excess fees charged by the credit provider as a means of collecting the debt.
It can also have a negative effect on a person’s credit rating, with judgments or blacklists being drawn against their credit profile, making it more difficult to access future debt. In light of this, South Africans are trying to catch up on debt and get ahead by paying more, with the average deal value increasing 36% year over year.
Due to the potentially fatal nature of the coronavirus, not only more and more people are purchasing funeral and life insurance, but policyholders are increasing their coverage amounts to ensure their families are taken care of if anything happens to them. The average transaction value increased 7% year-on-year.
This is due to the addition of more insured lives to active policies and is a trend that will increase in the years to come as market competitiveness lowers the cost of policies and increases the cost of policies. added value that is part of the benefits for policyholders and their families.
In addition, payment options in more informal areas are becoming increasingly accessible, such as the ability to pay cash bonuses at retailers. Payment solutions such as [email protected] also allow insurers to collect premiums in bulk from policyholders directly through digital invoice presentation and collection methods, reducing travel costs incurred by policyholders when making payments themselves. This saving allows them to free up cash for current expenses.
Despite the devastating factors behind these changes in people’s spending habits, it’s good to see South Africans taking proactive steps to protect their financial future.
“I would encourage them to take other measures if possible, such as being part of a stokvel. It is one of the main means of saving for many South Africans. Since last year, monthly contributions to stokvel have increased by 12%, and I suspect this upward growth path will continue as the economy recovers, ”said Blignaut.
There are several types of stokvels which serve different purposes. The latest Old Mutual Savings & Investment Monitor revealed that stokvel savings are used for groceries, tuition and buying a property.
South Africans may also begin to consider other investments, whether they are with their banks or endowment policies with insurance companies.
“If the pandemic has taught us anything, it’s that we must constantly look for ways to save for this inevitable rainy day,” explains Blignaut.