Edwin Naidu
It’s never too early for one to start saving.
Money literacy should be introduced in Grade R at schools so that a savings culture and the value of compound interest are instilled in children early in the schooling life. Savings clubs should also be formed early at schools to encourage this habit.
Experts are unanimous in their concern about South Africa’s distressing saving rates, which are among the lowest globally. The statistics paint a bleak picture. The situation is worsened when some of our leaders and celebrities, upon sudden wealth, squander their earnings on fleeting luxuries. This is where schools can play a crucial role in promoting financial literacy.
There is nothing wrong with having wonderful material things. But, taking a tip from one of the world’s wealthiest individuals, Warren Buffett when he says: “Do not save what is left after spending; instead, spend what is left after saving.”
By saving and spending what is saved, one can break free from the cycle of debt that keeps us trapped. However, there is a compelling argument for financial institutions to do better than the miserly incentives currently on offer. No wonder some well-off folks think they can earn more by keeping their money under the mattress.
As a young child growing up in a home with a single income and six mouths to feed, my dad survived every week on his modest clerk’s salary. The quantity surveying firm he worked for used to pay him weekly. There was no chance to save on school fees for five children. My late mom juggled the home fires well and ensured we had the tastiest food. But there were no savings, though they encouraged us to keep piggy banks to try and save, which we did.
This personal experience underscores the importance of early financial education. I am still recovering from the lack of education in this regard.
In the words of Warren Buffett, the key to financial stability is to prioritise savings. If we make saving a priority, we can eliminate the problem of not having enough funds to save at the end of the month. It’s a simple yet powerful shift in mindset that can make a world of difference.
For many of us, including myself, growing up meant living ‘hand-to-mouth’. In such circumstances, saving becomes a daunting challenge when you’re struggling just to get by.
Centennial Schools Deputy Principal Joseina Ramgareeb underscores the importance of saving taught at the school level by highlighting the current national savings rate of 16.3%, corresponding with an investment rate of about 18%, which will only fund economic growth of two percent.
Ramgareeb says Centennial Schools aim to produce work-ready matriculants for the economy. “We teach entrepreneurship, cryptocurrencies and blockchain, coding, and other real-world skills incorporating financial education into our curriculum. This is crucial for preparing our students for the challenges of adulthood and the responsibilities of contributing to the economy.”
Ramgareeb notes that starting an entrepreneurial venture – a lifeline for many young South Africans in the context of the prevailing unemployment – requires capital.
Without savings, one may struggle to achieve one’s goals. Of course, this can happen through taking loans from family or financial institutions. For the latter, one would need a good credit history.
Other options are available through organisations, such as the National Youth Development Agency, which funds entrepreneurs under 35.
According to Ramgareeb, a good credit history is imperative. She says one can build a credit score by having a cellphone contract, store card, or student loan in one’s name and
Returning to my wonderful parents, the rising cost of education is a testament to how people like them managed to put their children through school and make sacrifices to ensure our success. I recall school fees costing as much as R5. When my own children went through school I longed for my parent’s days.
According to research from the Old Mutual Group, putting a child through the public primary and high school system will cost parents an average of R651 313. Putting a child through private schooling would cost parents an average of R1 901 549.
Public primary school fees are currently about R24 408 a year, while private primary schools cost about R71 496 on average per year. Sending your child to a government high school will cost around R36 072 per year, while a private high school is likely to cost between R105 084 per year.
“Parents need to understand that education will get increasingly expensive over time, outstripping salary inflation,” says Marius Pretorius, the Head of Marketing Retail Savings and Income at Old Mutual.
“In real terms, education inflation outpaces the Consumer Price Index [CPIX] by 2.5% and 3%, making it unlikely that you will be able to save the full cost of your child’s university fees.”
But, says Pretorius, that’s not necessarily the goal of a workable educational savings plan.
“Rather than getting discouraged by an impossible figure, it’s important to understand the principles of an attainable savings plan and to focus squarely on the underlying aim – that is, to support your child to become a balanced, functional, and independent member of society in whichever ways best suit their unique passions and abilities.”
“This may or may not include a university degree. Your child may require financial support to learn an in-demand trade such as plumbing or start a business. Stay open to a wide range of options and remember that by the time your child finishes school, there will be jobs that don’t currently exist,” advises Pretorius. “This will help you to navigate the decades-long journey of educating a child.”
It’s clear, though, that saving is imperative for a sustainable future. Such lessons should be instilled from an early age.
Among the long list of priorities for Basic Education Minister Siviwe Gwarube, one hopes for the introduction of a savings habit among learners at schools.
Edwin Naidu is Inside Education Editor.
