Are Old School Methods of Saving Holding South Africans Back?
With the rise of digital technology, saving and investing can be done at the touch of a button and yet many South Africans still trust traditional forms of savings.
08/08/2022
If you grew up in the early 2000s or
before you might remember the piggy bank. For
many, it was the first lesson handed down by
parents on how to save money. One would gather
two rand, one rand or five cent coins and drop
them into the piggy bank. Once it was full it
was off to the bank to deposit the coins into a
bank account.
However, with the rise of
digital technology, saving and investing can be
done at the touch of a button. Despite this,
many South Africans still trust traditional
forms of savings. This begs the question of
whether there is a lack of understanding around
how easy digital tools make saving and
investing. Four industry leaders discuss.
Traditional savings methods aren’t understood
“Further investigation and research on the
savings habits of South
Africans discovered that most found formal savings offerings
to be overly complex and intimidating. For
others, the study reveals a lack of
understanding regarding how traditional savings
accounts help individuals reach their financial
goals,” says micro-savings app upnup’s Head of
Marketing and Strategy, Justin Asher.
According to these studies, despite the various
attempts by banks and institutions to attract
users to their savings tools there is still
dissonance around consumers opting into these
savings tools. In order to help consumers to
save, banks and savings platforms are looking at
automated savings. These are savings where
customers can select to either round-off or add
up their spend to the nearest rand, in options
like R10 and R20. With each transaction savings
are automatically sent to a savings wallet.
The average consumer likely accumulates
multiple transactions on a daily basis, and as a
result of the pandemic, a large portion of these
transactions are made using cards. Some
platforms allow consumers to diversify their
savings by transferring them into bitcoin or
points for items like petrol or groceries.
“The upnup platform operates solely off the
user's bank account transactions. As you
accumulate daily transactions, the platform
accumulates daily savings. It’s like tipping
yourself for good work at the till point.
Instead of spending your tips right away, you
invest them in Bitcoin, a non-traditional asset
whose growth has exceeded expectations, and one
that the world is slowly adopting more and
more,” says Asher.
This is precisely why
micro-saving and investing using digital over
traditional bank or ATM deposits makes perfect
sense.
Flexible alternatives for debt avoidance
No matter how well many of us
aim to manage our personal budget, unforeseen
expenses always come up. There comes a time when
it is necessary to replace old or
non-functioning appliances,
electronics, and furniture and all of these typically require a
large upfront cost, with the only way of
managing it being through high-interest credit.
Having said that, there is another option, one that’s
gaining traction both locally and
internationally. Rent-to-own is a transactional
model employed by Teljoy that allows consumers
to access goods on a flexible monthly basis.
Rather than purchasing a television outright,
consumers can digitally subscribe to the items
on a month-to-month basis with all the
maintenance and insurance costs built into
monthly premiums.
“Our subscription model prioritises access over ownership, allowing for unlimited use of the unit for no more than the cost of the monthly premium. It’s increasingly the way consumers across the globe are choosing to use electronics, appliances, furniture and even fashion and leisure equipment.”
Jonathan Hurvitz, CEO of Teljoy.
Variety through digital for long term payments
With added petrol costs not
everyone can afford to repeatedly visit the bank
to discuss home loan options with their
financial advisor. It’s now possible to apply
for a bond online at a time that is most
convenient. “We have seen that buyers want
greater control over the homebuying process and
this means increased use of digital platforms
that can take them through the application
process end-to-end,” says Carl Coetzee, CEO of
BetterBond. No one wants to submit reams of
paperwork and then have to wait for a response.
Online applications are quicker and simpler.
Aside from the convenience of being able to
manage the process themselves, applicants also
have a better chance of securing a competitive
interest rate for their bond. BetterBond applies
to multiple banks on the applicant’s behalf,
negotiating to get their clients the best deal.
BetterBond also offers several useful online
calculators to help applicants work out how much
they can afford, what their interest will be
over their required loan period and how much
they need for a deposit. “Convenience,
competitive rates and cost calculations are now
possible at the click of a button. Having a less
onerous application process has encouraged more
aspirant homeowners to apply for a bond and
start their homeownership journey,” says
Coetzee.
Digital tools are helping consumers to save more
Some brands give
consumers added bonuses for downloading and
making use of their apps. The MiWay Blink app
for example includes added bonuses for consumers
and gives customers access to emergency
assistance at all times - for example, they are
covered if they run out of petrol or if their
car breaks down, or if they get involved in an
accident. Furthermore, a customer may qualify to
receive a cashback paid into their bank account
every month, for the kilometres they don't drive
- if their driving for the month is less than
the base amount. The less you drive the more you
get. The app does all the magic in the
background.
Head of MiWay Blink, Keletso
Mpisane says, “You get to pay for insurance
according to the kilometres you drive, which
allows you to manage your budget better and save
money. The app is also a portal to comprehensive
car cover against accidents, vandalism, theft
and hijacking, fire and explosion, weather
damage and animal accidents. The app allows the
customers to get in touch with the insurer,
wherever and whenever they are, should there be
a need.”
The benefits of digital forms of
saving on insurance, appliances and investments
are plentiful. Whatever their financial goals,
consumers wanting to save and invest should look
to digital for options to save costs and build
financial security.