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South Africans have a dismal track record of saving. Employers can help

The average South African is struggling to manage their finances

The stats on the South African savings landscape are both shocking and saddening. Well before the Covid-19 pandemic and subsequent lockdowns brought many businesses and families to their knees, the financial position of the average South African was precarious at best.

While commentators in the media and government focus mainly on the unemployment rate (currently at 32.5% according to data from Stats SA for the October-December 2020 quarter), even those who are employed struggle to make their money stretch through the month. According to research by fintech platform PayCurve, almost 80% of South Africans take out expensive unsecured loans to cover their monthly financial obligations, as reported by Bloomberg. The article goes on to report that household debt makes up 73.7% of disposable income and 84% of people surveyed needed money before the next payday. And only 6%1 of retirees can afford to do so “comfortably”, according to the Alexander Forbes Member Watch 2020 analysis.

These statistics show that, left to their own devices, the average South African struggles to manage their finances. Interestingly, when the employer offers savings and financial planning assistance, savings rates improve dramatically. Research from the United States shows that people are 15 to 182 times more likely to save when their employer has set up a workplace fund. The same trend seems to hold true for South Africa, where roughly 90%3 of retirement savings are in workplace schemes.

Employers can help

Employers can therefore make a huge impact on their employees’ financial well-being by requiring compulsory saving. Matching employee contributions and offering complementary services such as financial advice and planning also help significantly.

Employee benefit programmes go beyond offering a savings product and financial advice. Medical aid, life, critical illness, funeral and disability cover, and counselling for mental and emotional distress, may all be included in the package. These are designed to assist employees to manage their personal and financial well-being to live comfortably within their means.

Often, these employee benefit programmes are the only access people have to a savings scheme, financial advice, or medical cover. This is why it is critical for employers to select good benefits that form a consolidated package that can look after their people.

At Alexander Forbes, we partner with employers to personalise their employee benefit offering with solutions tailored to their needs. We offer these at fees for institutions when employees join through their employer. We also provide training and support throughout employees’ working life – and beyond – to help them achieve financial well-being throughout their life. Now, that’s something they can count on. DM

1: https://mg.co.za/business/2020-11-01-sa-has-a-retirement-savings-crisis/

2 & 3: Alexander Forbes Value of Group Arrangements Consolidation, November 2020.

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