Inflation blamed for lower savings

A higher cost of living is cited by more than half of South African households as the reason for lower savings rates now than last November, said the Old Mutual's Savings Monitor.

The study found 53% of the 1000 working households surveyed saved less due to a higher cost of living and inflationary pressure.

Of concern to the researchers was that 22% said they were saving less due to the direct or indirect impact of retrenchment, less commission or members of their households being unemployed.

Since last year, saving for funeral expenses increased, as did saving to pay off debt, but saving for holidays decreased.

Saving for home improvement increased - which may be a sign of the weak property market - as people appeared unwilling to sell at unsatisfactory prices.

Higher costs also led to cutting back on luxuries, shopping at mass discounters and reducing store cards. There was an increase from 53% last year to 59% this year in home owners paying minimum monthly bond instalments.

But, in a sign of a short-term approach to managing finances, there was a rise in the number of people who used credit cards to 37% this year from 32% in 2009.

Old Mutual chief economist Rian le Roux said current savings rates were constraining growth.

"The global crisis is making it more difficult to save. Most South Africans are already badly under-provided for future liabilities."

Future investment returns were seen at 9%-11% from a weighted average of 16.5% from 1960 to last year. Government cutbacks had to be added to the mix. At the lower return mark, higher savings would be needed, probably up to 30% of income for as many as 35 years.

The study said it was "alarming" that one in three respondents felt the government could take care of them when they could not care for themselves; 33% believed their children would take care of them.

The "sandwich generation" that takes care of parents and children is becoming especially hard pressed to save. The survey showed 47% of respondents still not saving for retirement have less disposable income to do so. - I-Net Bridge