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July is a National Savings Month

July is a National Savings Month. It comes when our national savings statistics are at their lowest. Our household savings rate was 1.1 per cent in March 2016, meaning we save 1 cent from every rand we earn. Our debt ratio as a percentage of disposable income was 76.6 per cent meaning 77 cents of every rand we earn goes to repay debt. I felt that it was necessary to give you a few take-away points on the differences between savings and investments. You need a balance of both in order to achieve financial success and to weather the storms of poor economy.


You SAVE when you put money aside for a short term goal such as:

  • A deposit for a car or a house in 3 years’ time
  • An emergency fund equal to 3 to 6 months’ worth of your expenses
  • Belonging to one of 810 000 stokvel funds in SA with current savings of R49 billion
  • Belonging to one of 810 000 stokvel funds in SA with current savings of R49 billion
You INVEST when you put money away for a longer term goal to earn a return and growth such as:
  • One of the retirement funds where 11 million South Africans have R4 trillion currently
  • A 10 to 15 year education policy for your child
  • A unit trust fund that will supplement your retirement in 20 years’ time
Savings encourages financial discipline which is good. However, when taxes, savings costs and inflation are taken into consideration you find that you put a rand in a stokvel savings fund only to get a rand out – no effective return, growth, nor compounding. This is because effective growth is only possible over time, say 5 to 10 years that you keep your money in the financial markets. Unit trusts still remain a popular method to achieve investment goals.

On the other hand, a well-diversified share portfolio that you hold for 5 to 10 years is likely to compound strongly and give you 6 to 7 per cent above-inflation return. In this way you can afford to retire instead of merely saving yourself poor in the banks, stokvels and money market accounts.

Next week I deal with filing your tax return!
Picture of Mr Shabalala

Mr Shabalala

PRINCIPAL FINANCIAL PLANNER, SPIDDI INVESTMENTS

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Contact Details
  • Tel: 087 808 7826
  • Fax: 08661 35 659
  • Email: clients@spiddi.co.za
Postal Address

Postnet Suite 143,
Private Bag X01,
Brandwag, 9324.

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