While just over half (52%) of South Africans say they are saving for an emergency, only 19% would be able to survive for three months if they were to lose their income, according to a new survey by Budget Insurance.
“The survey also found that if an unexpected emergency occurred, which warranted an amount of R10 000, 26% of South Africans would need to borrow more money from friends or family and 11% would take out a loan to cover the remaining balance. 7% said they would cover the emergency using credit,” explains Susan Steward from Budget Insurance.
This compares with research done in the US with a third of adults not having enough savings to cover an unexpected $400 expense without selling something or having to borrow money.
“Currently, the outlook in South Africa is gloomy, with rising unemployment and threats of increasing fuel prices. For consumers, emergency funds need to cover not only the potential loss of income but, at the same time, unexpected disasters such as a burst geyser, a car accident or even a sudden illness,” notes Steward.
Promisingly, the research did indicate a more pragmatic approach to savings as the majority of respondents claim their willingness to sacrifice a luxurious lifestyle to be able to save, whether for emergencies or future events such as retirement or education fees. Also encouraging was to see that respondents aged 18-24 represent 86% of those who are currently putting money away on a regular basis.
With Savings Month around the corner, Budget Insurance has this advice for those wanting to save for a rainy day:
- Save at least 5% to 10% of your income until you reach the three to six months of expenses
- Set up an automatic debit order into your savings account and forget about that money entirely – yes it is another debit order, but one where you are paying yourself!
- Consider an insurance product that will cover those emergency expenses you do not anticipate.
- Cut unnecessary costs and turn them into savings – unnecessary holiday trips, eating out too often, buying branded clothes or even the gym membership you don’t use!
“These are the attitudes towards saving which need to be encouraged, and by planning for the unexpected by growing a liquid savings account, it will make dealing with those unforeseen and expensive surprises that much easier,” says Steward.