Whether rooted in tradition vehicles such as stokvels and burial schemes or embracing digital channels, South Africa's mid to top earners are saving and investing amid economic turbulence.
With South Africa observing National Savings Month in July, BrandMapp — an annual landscape study of 30,000 South African adults living in middle-class and top-end households — has turned the spotlight on how the country's mid-to-top income consumer class is navigating savings and investments in a tough economy.
The data shows 80% of this group has some form of savings or investments, with banked cash being the most popular choice across all age groups.
Traditional vehicles such as burial schemes, pensions and retirement annuities remain strong, while tax-free savings and money market accounts also have a presence.
When it comes to deciding how to save, the most popular choice is banked savings. 30% of the consumer class have money in the bank that is kept aside from their monthly cash flow. It’s appealing to both young and old, with 32% of Gen Z and 35% of Boomers opting for banked savings.
Burial schemes (28%), pension and provident funds (28%) and retirement annuities (24%) are also top saving and investment channels. 18% of the consumer class have tax-free savings accounts and 10% are saving in money market accounts.
A relatively small group of 14% of the consumer class invests in shares and 7% in unit trusts. There’s also 7% investing in cryptocurrencies.
Once a community-based resilience tool for the working class, stokvels are still a feature of the South African savings and investment landscape, and a significant choice for 14% of the country’s mid-to-top income earners.
“In many ways, the savings journeys we have mapped are what you would typically expect of the educated, employed mass market at their different stages of life. Your savings and investments are all about your financial capabilities.
“And so, it’s not surprising that the younger generations, just setting out on the journey, have simpler portfolios, while those of the older generations are more diverse and sophisticated,” said BrandMapp’s Brandon de Kock.
He believes cash, saved in the bank, is king for South African taxpayers.
“This is interesting if you are an investment house because it means that money in the bank is your biggest competitor. Perhaps, this is just a natural human response to the current upheavals in markets, and a reflection of today’s high level of consumer uncertainty. It’s the financial equivalent of food in the freezer.”
De Kock said when it comes to crypto currency the data shows that “investing in crypto, at this time, is more of a gamble, a bet on the future, than an investment”.
“It’s very youth-oriented, dominated by millennials, with men more than twice as likely to have crypto than women.”
“This is most likely because, over the past decades, stokvels have evolved considerably with major banks offering stokvel‑specific accounts, insurance perks, digital tools and secure banking.
“Some of today’s stokvels also include investment components, so the purpose of the association is not necessarily just saving for emergencies. Stokvels are one of the few savings and investment vehicles where women are more likely than men to be invested.”
He believes saving and investing in South Africa reflects both the resilience and adaptation of the country’s mid-to-top earners.
“There’s no doubt that the majority of people living in South Africa — the millions who live in households earning less than R10k per month — are constantly in ‘survivor mode’ and it’s a struggle to just put food on the table.
“But what the data shows is that if you’re fortunate enough to have a job and you do have money left over once you have made ends meet, the inclination is to save or invest. Whether rooted in tradition or embracing digital channels, we are seeing a consumer class that is finding ways to move forward in saving and investing, even if it’s along an economic road that is rocky.”
Kobus Kleyn, advice partner at Liberty, said the middle of the year is a good time to take a “real look at our finances while taking stock of our savings journey”.
“The economy is tough for everyone at the moment, and in times of financial need, the temptation to access savings can be strong.”
Kleyn said while many South Africans are facing trying times financially, it is crucial for those who have saved and invested some money to stay invested to ensure long-term financial security and stability.
He said in tough times people should strike a balance between short-term needs and long-term goals.
“While adjustments may be necessary to address immediate concerns, it is vital to avoid making impulsive decisions that could compromise financial security in the long run.”
Kleyn said for young adults, aged 25 to 35, it is crucial to instil saving habits early, even if the amounts are small.
“Saving for retirement at an early stage allows for a longer investment horizon, maximising the potential returns and reducing the burden of funding retirement in later years, which is always a good idea.”
Kleyn said for middle-aged adults between 44 and 55 despite balancing multiple financial responsibilities, saving for retirement “becomes increasingly important as time is still on your side, allowing for a longer accumulation phase”.
“It is crucial to strike a balance between meeting current financial needs and consistently contributing to retirement savings before it is too late, while paying off debt.”
“If you are nearing retirement, your focus will want to shift towards ensuring you have sufficient savings to maintain your desired lifestyle and cover healthcare costs in retirement. At this stage, the priority is often capital preservation and protecting your accumulated wealth while boosting retirement funding with the help of Sars subsidies.
“Before accessing long-term savings, explore other options to find money. Start by creating a detailed budget to identify potential areas for cost-cutting or reallocating funds. Maybe even look for opportunities to increase income through side hustles, for example. If you must borrow to survive, your bond would normally be the most cost-effective option, if you use it for a short period and catch up on bond payments again,” said Kleyn.
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