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The concept of saving is “nice to have” but difficult to do, says Nolene Parbo, senior manager of deposits and retail banking at Standard Bank.
Some consumers are willing to have banks “forcefully” take money from their accounts and deposit it in savings, through a debit order or stop order, says Parbo.
But saving is about consumers having the discipline to pay consistently first, she says.
There is a desire among lower-income consumers to become more knowledgeable about saving, says Parbo.
An economic review by BankServ Africa indicates that disposable income for households is increasing – though still low – and consumers have excess funds available and increased capacity for savings.
This has been accompanied by a reduction in household consumption expenditure, which remains low relative to real disposable income, she says.
Credit extensions have also been limited, so consumers can’t supplement their income with debt any longer.
In 2014, household credit growth slowed from a rate of 5.5% to 3.4%. Household spending was further affected by the increase in personal income taxes, rising fuel levies and electricity tariffs, which all contributed to a higher cost ?of living.
The household industry deposit growth is a measure that indicates how well households manage their credit flows, says Parbo. Growth in March 2015 showed an increase to 14.93% from the previous year’s 14.27%. The average year-on-year growth for 2015 was 15.48%, up from 10.25% in 2014. There were positive trends in household saving but disposable income is still low at around -2.3%, with debt still at ?high levels.
Behavioural trends in the Standard Bank Portfolio indicate that although new savings accounts peak at the first quarter of the year, they reduce over time. Consumers do not make deposits into these accounts consistently. It is not easy to be disciplined, but it is necessary to build a culture of saving, says Parbo.
Saving is simple
Parbo says saving is as simple as cutting out luxury costs. If a consumer saves R100 a month, just by reducing coffee or cigarette expenditure, at a compound rate of 6% over five years, the consumer would have saved R8 029.
Feedback from the educational initiatives that inform consumers about ways to save shows that consumers are often unaware of how simple saving can be, she says.
Exclusion from the formal banking sector is not a major challenge in consumer saving behaviour, says Kabelo Makeke, head of customer financial solutions for retail at Standard Bank.
Banking penetration has improved over the years, and 79% of adults use banks now, he says. Most consumers now understand and know what a bank account is and how it works. The savings culture, however, is more limited by the capacity to save.
This article originally appeared in the 9 July 2015 edition of finweek. Buy and download the magazine here.
