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The need to build up savings and reduce the national appetite for debt will be the focus in the next few weeks as the country embarks on National Savings Month [July].
A report by the National Credit Regulator shows South Africa's household debt against income ratios equate to a very high 79%, resulting in almost 6000 people applying for debt counselling each month.
This comes as no surprise, the report states, considering the scale of unemployment and poverty that the country faces.
It adds that people are borrowing money to pay their taxes, school fees and monthly living expenses.
"Where consumers are under pressure with the increasing cost of living, there is a rapid decline in the country's household savings rate - currently at 0.2% of GDP," the report states. With this in mind, it is imperative, the report notes, that consumers understand the household savings landscape.
It continues that they must also understand the effect that the lack of management can have on their financial viability in the future - especially when it comes to their children's education, retirement and, of course, the challenge of a recession.
Financial services company 1Lifedirect is joining the campaign to sensitise South Africans to save more and reduce their debt. Says Laurence Hillman, MD of 1Lifedirect: "Savings and investments are critical to financial stability within the household.
"A lack thereof can significantly reduce the ability of individuals to withstand sudden changes in income or prices of everyday goods."
Hillman says this will also adversely affect their ability to maintain their prior levels of consumption in the case of these unforeseen circumstances.
"Therefore, I strongly believe that it is the responsibility of financial institutions to educate consumers around the key elements of saving and how to avoid debt as a cornerstone to this commitment," says Hillman.
Source: http://www.sundayworld.co.za/Feeds/SundayWorld/2012/07/09/bid-to-cut-debt-appetite
