South Africans are not saving enough, and only 6% of them will be able to maintain their standard of living after retirement. Research by Trading Economics shows that, among the G20 countries, South Africa ranks the lowest in terms of household savings rates.
At the beginning of 2019, the ratio of household savings to disposable income was at 0.15%. Among working urban households in South Africa, 40% of people have no formal retirement savings.
What is the savings benchmark?
The amount you should be saving will always depend on your goals, the time you have at your disposal and your ability to save, says Jan van der Merwe, head of actuarial and product at PSG Wealth.
"While each person's saving decision is unique, a simple rule of thumb provides a handy starting point to at least get you thinking along the right lines."
Guidelines for your after-tax income:
Allocate at least 15% of your pre-tax income to retirement savings;Allocate 60% of the rest for necessities like housing, food and utilities;Allocate 30% (of the 85% left after deducting the initial 15%) for discretionary spending like entertainment and luxuries;Allocate 10% (of the 85% left after deducting the initial 15%) into discretionary savings, for instance education, an emergency fund and holidays;Start saving small and gradually increase what you save each year;Always adjust the amounts you save annually in line with inflation increases;Keep a record of all the money you spend and compare it to your budget each month. This will help to point out where you need to make some adjustments to your spending;Don't try to keep up with the Joneses;Keep that old cell phone for a few more years, drive your car for a few more years, and remember that you don't always need the fanciest branded clothing;Always preserve your retirement savings when you change jobs.
How quickly your savings could add up for different amounts: