• Ru Harris

Transforming the Working Class to the Savings Class

We’re all too familiar with the term: save for a “rainy day”. But, we didn’t expect a flood.

The destructive impact of Covid-19 on a personal, social and economic level is unlike anything most of us have experienced in a lifetime. Truth be told, Mzansi was not prepared for this brutal economic onslaught.

In pre-Coronavirus South Africa, 76% of households already lived paycheque to paycheque and depended on exorbitant unsecured loans or credit card debt to make it to the next pay day.

According to the National Credit Regulator (NCR), more than four out of 10 people in SA have impaired credit records. The outbreak of the deadly Covid-19 global pandemic further crippled our economy and caused three million people to lose their jobs during the lockdown period. According to statistics, the bleak reality is that only 19% of employed South Africans have a reserve fund to support themselves financially for up to three months during unemployment. Furthermore, even with a job, the majority of South Africans are unable to cover an unexpected expense of R10 000 and more. And sadly only 6% of us will maintain our standard of living after retirement.

If the coronavirus has taught us anything it’s that having an emergency or savings fund to weather a financial storm is crucial. According to the South African Savings Institute (SASI) saving for retirement and other future needs will leave us better off. SASI advises that having a savings fund is not only good for building personal wealth it’s also good for the economy. By saving more, South Africans create a greater pool of investment capital, which stimulates economic growth by creating jobs.

SASI explains that while buying on credit helps the banks and retailers, it does not help the consumer. When we save or invest, interest works for us and we get paid interest on our savings. Buying on credit makes interest work against us because we end up paying interest to the banks or retailers. Having access to credit also entices us to buy things we don’t really need and also can’t afford, so we end up living beyond our means.

An online survey done in July by research company ADNA found that more than 66% of South African households don’t save even though most earn over R20 000 a month.

37.8% of those who took part in the study said their salaries are too low and don’t cover all their expenses, while another 31.8% said they support extended family and can’t afford to save. “We can blame issues such as black tax, high unemployment, a rising tax burden and inflation, but we also must fundamentally stop living beyond our means and drive a savings culture to break the cycle of intergenerational debt,” says SASI’s vice chair Prem Govender.

Meet your savings target with Level Level Finance understands that saving money may seem impossible when wages tend to remain the same amid the rising cost of basic living expenses like food, housing, transport and healthcare for example. In a new review of SA’s financial stability across key economic sectors, the South African Reserve Bank (SARB) found that actual disposable income grew by only 0.9% in 2019 - a decrease from 1.5% in 2018.

“As a share of disposable income, household net wealth has been gradually declining since 2014, but remains substantial at 363%. As a result, households are spending, on average, 9.4% of their disposable income on servicing debt – the most since 2016,” the bank reports.

Financial wellness starts with the ability to build savings, which will ultimately alleviate financial stress and help you move towards lasting financial security. But, when you can’t stretch your salary as far as the month is long and you end up dipping into existing savings or take out expensive loans, you feel like you’re stuck between a rock and a hard place. Level has your back with its Earned Wage Access (EWA) platform that allows employees full transparency into their daily salary, access to their pay when they need it and the power to save before payday arrives.

EWA is a groundbreaking new breed of financial products that serves employees’ short-term financial needs, while helping them save and build long-term wealth. The concept is simple: employers register their businesses on Level and this allows their employees to make use of Level’s EWA app – drawing from their own accrued wages when they need it, without creating a debt obligation. This is money you have already worked for, so it’s not a loan, there’s no credit check and no interest charged.

With Level’s EWA app, employees pay a small transaction fee (only when they use the app), which is a fraction of the cost of a payday loan, a single overdraft or credit card fee. But Level is not just about giving you access to your pay for financial emergencies. The platform has a built-in savings feature, which is designed to help employees save a portion of their salaries before payday. You can save as little or as much as you like.

Now, as an employer you may wonder how helping your employees build a savings buffer will help your business. According to the DebtSafe June 2019 Financial Reality Survey, debt-related stress has severe negative effects on employees’ physical, emotional and mental health. Financial stress doesn’t stay at home – employees bring it to work with them. Debt-related stress creates disgruntled employees whose poor performance leads to a decrease in productivity and an increase in turnover, fraud and theft.

A loss in productivity costs employers an overwhelming 35% of annual payroll. As an employer, you have an opportunity to not only help your financially stressed employees but also to help your company’s bottom line. Schedule a demo today by visiting: www.levelfinance.co.za and offer your employees a financial lifeline.

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