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Cape Town - A critical concern for most South Africans is if the currency weakens what happens to the value of their savings, said Stanlib chief economist Kevin Lings in an interview with Fin24.
He said that a vulnerable rand not only reduces the purchasing power of consumers, but it also reduces the value of savings.
"If the currency has weakened by 10%, the value of your savings has weakened by 10% and consequently your purchasing power has effectively gone down."
"We have to recognise that if the currency continues to weaken then obviously the value of your savings is continually eroded," said Lings.
Given that the rand is vulnerable, he advised that consumers should diversify their investments and take the maximum amount that they can offshore.
He suggested an optimal level of 30% for offshore investments, according to Stanlib calculations.
"It doesn't really make sense to live and work in South Africa and have let’s say 70% of your money off shore - that would be fairly inconsistent."
Lings also warned that investing in other currencies doesn't mean those countries don't have any problems.
He said it is merely a way of trying to protect the value of one’s total savings even if the local currency comes under pressure.
The Reserve Bank stated in its quarterly bulletin that households saved an amount of R72bn, indicating a savings rate of 1.7% over five quarters to June.
South African high net worth individuals hold 32% of their wealth offshore, with the UK being the largest booking centre, according to Datamonitor’s 2012 Global Wealth Managers Survey.
- Fin24
Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue.
He said that a vulnerable rand not only reduces the purchasing power of consumers, but it also reduces the value of savings.
"If the currency has weakened by 10%, the value of your savings has weakened by 10% and consequently your purchasing power has effectively gone down."
"We have to recognise that if the currency continues to weaken then obviously the value of your savings is continually eroded," said Lings.
Given that the rand is vulnerable, he advised that consumers should diversify their investments and take the maximum amount that they can offshore.
Watch full interview
He suggested an optimal level of 30% for offshore investments, according to Stanlib calculations.
"It doesn't really make sense to live and work in South Africa and have let’s say 70% of your money off shore - that would be fairly inconsistent."
Lings also warned that investing in other currencies doesn't mean those countries don't have any problems.
He said it is merely a way of trying to protect the value of one’s total savings even if the local currency comes under pressure.
The Reserve Bank stated in its quarterly bulletin that households saved an amount of R72bn, indicating a savings rate of 1.7% over five quarters to June.
South African high net worth individuals hold 32% of their wealth offshore, with the UK being the largest booking centre, according to Datamonitor’s 2012 Global Wealth Managers Survey.
- Fin24
Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue.
