According to analysis done by savings fintech start-up MyTreasury.co.za, South African’s household savings rate comes last when ranked against the G20 countries. This is distressing news during savings month as it means that too many South Africans are living in debt or eating into their capital.
These finding are consistent with the worrying picture painted by Old Mutual Savings Monitor: among urban working households, an alarming 40% of respondents said they have no form of formal retirement savings at all. Thirty-two percent of respondents said they would rely on government and 38% their children to support them in retirement. The situation is likely much worse among the unemployed population.
In addition, many of those South Africans who do manage to squirrel away some money aren’t saving wisely. While 16 million do have savings accounts, they are emptier than they should be and, according to the latest SA Reserve Bank statistics, about 40% of this money sits in accounts that offer very low interest rates, if any interest at all.
A person who has savings could be earning as much as 10% on their money each year, and growing their wealth faster, just by switching to higher-interest paying accounts.
Since the launch of MyTreasury.co.za in late 2016, the independent personal finance comparison website has allowed more than 250 000 South Africans to compare their saving options online – helping them to identify the best interest- rate options based on their personal situations and requirements. The easy-to-use service is free and gives users suitable alternatives once they have answered a few simple questions. It searches 600 different rates at 10 financial institutions to find the best options. Users can select amounts from R1 000 to R50 million, and specify how soon they might need access to their money (ranging from one day to five years) – and the options are constantly expanding.
During national savings month many organisations are coming out with useful tips and campaigns to get South Africans excited about saving.
Recommendations about how to save range from lifestyle changes – such as hunting for bargains, limiting luxury spending and committing to put away a fixed amount of money every month – to more long-term strategies like setting financial goals, consolidating debt and paying off loans early.
MyTreasury.co.za has come up with a novel way to boost savings. For those who are currently saving, it suggests they grow their wealth by investing more wisely.
Warren Kopelowitz, CEO of MyTreasury.co.za, explains: “Efficient saving can make a massive difference to your wealth. Moving your cash from a call account that offers returns of 3% to a long-term fixed deposit with an interest rate of 10%, for example, would effectively double your wealth over 10 years!”
With so much to be gained from switching to higher interest rate deposits, why do so many South Africans continue to keep their money in low- or no-interest paying bank accounts? The savings market is opaque and complex, making it virtually impossible to identify the highest-paying savings account that best suits an individual’s requirements.
For instance, some banks offer higher rates for seniors but do a poor job of marketing this. And it’s difficult to find bank-rate data without comparing rates across multiple banks and products. Trying to find the best rate for the specific profile and savings preferences of an individual is even more convoluted and time-consuming.
MyTreasury.co.za considers the user’s personal profile, including factors such as their age, to determine whether they are eligible for a preferential rate. In the current economic climate, nobody can afford to leave their money sitting idly.
“Savings accounts are a great way to encourage smarter wealth management,” says Kopelowitz. “Just about everyone has a bank account, and by urging people to see their ordinary bank accounts as tools for actively generating income, we hope to make South Africans keener to save. It doesn’t cost you anything to get higher returns on your cash, but you need to know how to compare and where to look.”
MyTreasury.co.za is a gold member of AlphaCode, a club for fintech start-up entrepreneurs powered by Rand Merchant Investments. As AlphaCode head Dominique Collett says: “Consumers need the right information to make good financial decisions.” She adds that the complexity of savings products and different interest rate structures and calculations makes it difficult for consumers to accurately compare the available options, and is a major problem in growing SA’s savings culture. “Being able to compare products so you can assess value is important in a competitive market. MyTreasury.co.za is therefore a valuable addition in the fintech landscape as it empowers consumers to make good financial decisions.”
Source: The Moneyweb