“Opportunity is missed by most people because it is dressed in overalls and looks like work.”
~ Thomas Edison
35% of middle-class South Africans do not save any money at all, and 61% are saving 10% or less.
In a country where 11.9% of those living between the upper and lower bound poverty lines are vulnerable households, these are troubling statistics.
Not saving money at all is the road of financial self-destruction. Saving money provides personal power, self-reliance and peace of mind. The more you save, the less you fear. The more you save, the less you spend. The more you save, the greater your chance is of achieving the livelihood of your dreams.
So what’s the ugly truth? A lot of us cannot afford to save…
By the age of 35, statistically, you should have saved at least half of your annual salary towards retirement. This does not count in the amount of money that you should be saving for emergencies and specific goals in your life such as a deposit toward a home loan.
Perhaps, up until now, life has been a day-to-day survival strategy. Perhaps you have raked up a substantial amount of debt. Perhaps someone told you that saving is not important, or you never had good enough role models. Regardless of the reason that your savings are not where they should be, there is always the best time to start – now.
Before we dive into a few common questions and concerns around savings, enter our Food Index Survey now. The winning entry will receive R500 cash.
How does Debt Affect my Savings?
Debt repayments should not affect your savings. If you are budgeting correctly, you will be saving and repaying your debt each month without a problem. Unfortunately, inflation, interest rates, fuel prices and electricity increases have all tipped the budget to weigh heavily on expenses.
The rule of thumb is, 50% towards essential living expenses (rent, utilities, food, transport), 30% towards (dining out, subscriptions, clothing) and 20% towards your savings.
But not many of us can stick to that rule of thumb…
In theory, debt would fall into an essential living expense. Many allocate the 20% they should be saving to debt instead.
The majority of people who need financial assistance such as debt review, spend an average of 60% of their total income to service their debt. How much are you spending on debt versus your income? Download your credit report here to see where you are standing.
If you anticipate that your budget will no longer sustain your debt repayments, debt review may be the answer. Debt review restructures your debts to make repayments affordable. The debt counselor will put together a budget for you to ensure all living expenses are covered. All your debt is consolidated into a single affordable monthly repayment. The aim is to rebuild your financial profile, so that you can get rid of debt and focus on saving instead.
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How to Get The Best Savings Rate
Savings accounts differ from financial institution to financial institution, so you need to do your homework before choosing one. Many banks offer different interest rate structures. For example:
On a R2,000 deposit you will earn 0.1% interest on every R100. This interest rate, which is money that the bank pays you to leave your money in your account, will then increase to 0.2% after you have R10,000 in your account.
Other banks may use time as an indicator for interest rate increase. For example, if you leave your R2,000 in your account for one month you will receive 0.1% interest. However, after 6 months your interest rate will increase to 10% and so forth.
The general rule of thumb is that the longer you leave your money in the savings account, the more you will earn. The more money that you have in the savings account the higher the interest rate will be.
Do your homework and ask your financial institution for details about your savings account and make an informed decision about which savings account will work the best for you.
How Savings Accounts Affect My Credit Score
Many aspects affect your credit score, your savings account is not one of them. Your savings account will however help you in accessing credit. The more you can show that you are financially stable, the higher the likelihood of credit being granted to you is. Your free credit score can be downloaded here.
The most damaging financial aspect to your credit score is defaulting on debt repayments. It can take a score that is above 700 and bring it crashing down into the red zone in a matter of three months.
Defaulting on debt is disastrous and will prevent you from accessing credit, being granted a home loan or any sort of personal credit from accredited financial institutions. Debt review can be a brilliant solution to those who are feeling the blow of rising costs whilst managing their debt. Choosing an expert debt counselor such as Debt Rescue when you’re struggling to keep up with your monthly repayments, saves your credit score as well as your budget.
If you feel the crunch of economic stress pounding at your door, it is best to investigate debt review by contacting one of our friendly consultants. Find out how we can assist you.
Want in on the top 10 Super Savings Tips for South Africans? Watch them here.
For the last 12 years, Debt Rescue has been at the frontlines assisting over-indebted South Africans. Debt Rescue has managed to help thousands of consumers achieve financial freedom through the debt review process. Contact us now to see how you too can manage your debt affordably.