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SASI warns of unplanned festive spending

South Africans should exercise financial discipline when spending during the festive season or face financial strife in the new year, the South African Savings Institute (SASI) has warned. Consumers are urged to adopt a forward-thinking approach in the area of personal financial management.
Speaking at the launch of its Festive Season Savings Campaign (FSSC) this morning, SASI chairman Prem Govender said that households and consumers should not be carried away on the tide of unplanned spending that normally characterises the end-of-year festivities.

This year's Festive Season Savings Campaign comes after the release of the Consumer Financial Vulnerability Index 2011 Q2, which shows an increase in overall financial vulnerability for consumers in several categories.

There is also increasing concern about a trend for consumers to be shortsighted about finances over this period, which compromises long-term savings and investment for the country. This was echoed by the National Treasury at the recent OECD/IOPS Global Forum on Private Pensions.

Resisting temptation to overspend

Under the theme, Spend Wisely, New Year Ahead, Govender urged consumers to adopt a forward-thinking approach in the area of personal financial management, in order to contribute to the growth and development of our country. "It begins with resisting temptation to overspend unnecessarily," she advised.

"While we acknowledge the spirit of giving that is so characteristic of Christmas, responsible spending - without incurring debt - is the healthy option for any household. We are asking South Africans to take a sober assessment of their expenditure during this festive season.

"We believe that it is possible to enjoy this time of the year without making financial decisions that will be regretted when we, inevitably, have to face the realities of 2012, which include school fees, medical care, transport to work, and other expenses that come too quickly at the beginning of the year," Govender continued.

Festive Season Savings Campaign

SASI adopted the Festive Season Savings Campaign as a means of helping consumers enjoy the festive season while simultaneously enabling them to meet their financial commitments going forward.

The campaigns objectives are:

  • To raise awareness about, and to inculcate a culture of, saving during and beyond the festive season
  • To guide consumers as to how to avoid unnecessary consumption expenditure so as to better meet the obligations that immediately follow the festive season
  • To complement/consolidate SASI's messages conveyed during the July savings month

Govender said: "As with the July savings campaign, SASI is targeting both the young and the old. We will offer advice to adults and distribute money boxes to children to encourage them to start saving now for their future aspirations.

"With our country's gross savings rate averaging 15 percent over the past decade, it's not surprising that investment as a proportion of GDP stood at 19 percent in 2010, when at least 25 percent is required to achieve and sustain high growth rates.

"It is such statistics that underpin the relevance of SASI's initiatives, like the 2011 Festive Season Savings Campaign. We need to make saving a lifestyle all year round," she said.

Excessive dependency on the state in Europe

Govender urged consumers to look at trends in Europe, where poor financial planning increased excessive dependency on the state with serious economic ramifications, namely, excessive sovereign debt and, ultimately, defaults. In turn, these measures impact the consumer negatively, if not properly managed.

Since SASI's 2010 Festive Season Savings Campaign, consumers' debt servicing, income and savings vulnerabilities had increased.

Of the 18.8 million (53.3 percent) credit active consumers, about 8.8 million (46.7 percent have impaired records, while more than 278 000 have applied for debt counselling. Long-term unemployment as a proportion of the total unemployed individuals stands at 63.5 percent.

"We all agree," said Govender, "that without a source of income, it is difficult to save; and yet no job is guaranteed. However, several salaried employees will be receiving end-of-year bonuses. To these few privileged individuals we send a message of prudent financial planning during this period, both for now and for retirement, to weather the effects of uncertainity in future income streams."

These savings, she emphasised, are meant to cushion them in times of reduced or no income, subsequently reducing their vulnerability.

Appreciate what you have, rather than wanting more

"In these difficult times, we hope that households will appreciate what they have rather than continually wanting more and paying for their current consumptions with future incomes. We will work closely with the National Credit Regulator (NCR) and the National Consumer Educational Committee to educate consumers on how to use credit responsibly during and after the festive season. While a cut in interest rates provides consumers with some extra disposable income, it is wise to use such a wind-fall gain to pay-off debt," she added.

Because consumers expressed a lack of trust in financial services providers, SASI wished to share the November savings month with the Financial Planning Institute (FPI) by dedicating a full week to educating consumers on how to deal with professional financial planners.

"SASI believes that this Financial Planning Week (26 November to 2 December) will empower our consumers with the relevant information to aid their financial planning process."

SASI has collated statistics relevant to savings-related indicators; numbers that demonstrated the challenge that faced all stakeholders in their quest to achieve desired growth rates.

Govender confirmed SASI's commitment to:

  • Creating awareness about the importance of saving , through such campaigns as the Savings Month
  • Supporting campaigns like Teach Children to Save, Varsity Financial Literacy Campaign, Community Financial Literacy, Festive Season Savings Campaign
  • Providing the necessary information to assist consumers to make informed decisions for their financial wellbeing.

Govender concluded by providing consumers with a few savings tips for the festive season:

  • If you did not budget for a festive season trip, stay at home
  • If you did not save, don't borrow to spend
  • Make the season's gifts instead of buying them, thereby adding heart to the gift
  • Give your precious time, rather than money, to the needy;
  • Invest in money boxes for children
  • Avoid buying on impulse
  • Resist those "Sale" signs
  • When you see "Sale", think "Save"
  • Budget for next year's school requirements - fees, stationery, uniforms, etc - before you spend on the festive season.

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