South African households are under immense pressure as disposable income continues to shrink due to continuous increases to interest rates, with little or close to nothing to spare. The economic uncertainty presents a challenge for many households as they battle to make the most of the rand. 

Yet it is during these challenging economic times that we need to be financially savvy and intentional about saving. Lessons can be learnt from the COVID-19 pandemic, which placed a strain on household income; this was followed by a series of fuel hikes and higher food prices due to global supply shortages. This period highlighted the importance of having savings to fall back on when times get tough, and changed how people view and manage their finances. 

Historically speaking, South Africans haven’t had much of a savings culture. This has been exacerbated by the current economic situation. South Africa’s 2023 first-quarter household saving rate was -0.20%, which is a decrease from the already low 0% in the fourth quarter of 2022.  This highlights that many of us are not living within our means, are highly indebted and not saving adequately. With the current economic turbulence, most people are struggling to meet their day-to-day expenses and manage their finances, let alone save for the future. 

So how do you start or continue to save money in such an economic environment? Ask yourself what you intend to save for. Start saving with a specific goal in mind: identifying, clarifying and prioritising specific saving goals will increase the likelihood of consistent and intentional savings. Common household saving goals include saving for emergencies, retirement, education, funerals and deposits for a house or car. Saving goals should also be categorised as short term, medium term or long term – this will inform how you save, as a particular saving product might be more appropriate for your saving goal and its associated time horizon. 

Once you’ve set your goals and the time frame that you want to achieve them by, you need to plan how you are going to achieve these goals. This starts with knowing what you spend your money on. Go through your bank statement and jot down where every cent of your hard-earned money goes. Once you know where your money goes, compile a monthly budget. A budget allows you to compare your income to your expenses, and helps you to plan your spending and saving. Remember to make provision for expenses that may not occur every month. 

If you have determined that you can’t save as much as you’d like to, or need to, it’s time to evaluate your spending habits. Decide which of the items in your budget are necessities (needs) and which are “nice-to-haves” (wants). Thinking about (and seeing) your expenses can help you identify areas where you can make cuts. For example, planning weekly meals in advance may not be very exciting, but by going to the grocery store once a week with a shopping list in hand, you can save money (and time). Remember, every change and sacrifice that you are making now brings you closer to your savings goal. 

Apply the principal of “paying yourself first”. On payday, immediately transfer the amount that you intend to save from your bank account to your savings product, and boost this with any bonuses or tax refunds you may receive. 

The next few questions that need to be addressed are related to where to save your money and which savings products are appropriate. The following guidelines can bring you closer to your financial goals:

• ​Before saving, first pay off any short-term debt, especially credit and store cards that charge a high rate of interest.
• If you have a bond on your property, paying in additional money will help you to pay off your property quicker and save money on the interest that would have been charged.
• Make sure that you have an emergency fund that you can easily access in case of unforeseen expenditures.
• For short-term savings, interest-bearing investments are appropriate as your returns will be more certain. This can be in the form of a formal savings account, fixed deposit, notice deposit or Money Market account with a bank; or an informal stokvel, savings club or credit union.
• Over the medium to long term, investing in growth assets like equity, property and offshore investments or balanced funds that invest in a combination of assets becomes more appropriate. 
• When saving for retirement, contributions to a pension fund, provident fund and/or retirement annuity are usually preferred because of the tax advantages of these vehicles. You will also be able to access a range of different asset classes through these vehicles. Transfer any accumulated amounts to a preservation fund when you resign or change jobs to preserve this money for your retirement.
• A tax-free savings account can be used for various purposes with the added advantage that all the income earned, and withdrawals, are free of tax. 
• Most savings products will allow you to save a lump sum or to make monthly contributions, but might have minimum amounts for each.

The current economic environment poses a challenge to our savings behaviour and may make saving feel impossible. However, it is possible to get into the habit of saving by having clear goals in mind, keeping track of your expenses, making financial sacrifices and identifying the appropriate saving products to use