Here is the reason why you aren’t saving any money

New data by Standard Bank finds that as much as 94.5% of households in South Africa have negative net incomes, with the poorest showing the largest deficit in net income.

Only 5.5% of South African households – those within the three highest income brackets – potentially have the ability to save each month.

Standard Bank pointed out that low income households already have very low disposable income before any expenditure is deducted.

The bank used a simple equation  – expenditure per household versus income net of taxes, to assess affordability and the savings patterns of South African households.

It found that majority (94.6%) of the population are potential dis-savers. Net income is highly negative for those households whose combined income is below R86,000 per annum i.e. the low income groups, and marginally negative for those earning between R86,000 and R688,000 per annum i.e. the middle income groups.

Standard Bank

Standard Bank noted that reasons why households can still subsidise their consumption with a small after-tax income is:

  1. Households take on credit to finance their consumption, since their incomes do not match their demands.
  2. Household consumption is financed by remittances. Remittances could come in the form of wealthy individuals in the family sending money to the household or it could also come in the form of gifts/donations.
  3. Households in the lowest income brackets tend to under-report their income as they generate income informally and not from formal employment.

Standard Bank, using data from the Bureau of Market Research (BMR), puts the annual income classification of the South African consumer at the following:

Annual income Monthly income Classification
R0 – R19,000 R0 – R1,583 Lowest
R19,001 – R86,000 R1,584 – R7,167 Second lowest
R86,001 – R197,000 R7,168 – R16,417 Low emerging middle
R197,001 – R400,000 R16,418 – R33,333 Emerging middle
R400,001 – R688,000 R33,334 – R57,333 Lower middle
R688,001 – R1,481,000 R57,334 – R123,417 Upper middle
R1,481,001 -R2,360,000 R123,418 – R196,667 Upper income/Emerging affluent
R2,360,001+ R196,668+ Affluent

It finds that emerging affluent households (R1,481,001 – R2,360,000 per annum) can potentially save 19% of their after-tax income.

Affluent households (R2,360,001+) have a savings potential of a stellar 65% of their after-tax income. “This group also has the highest positive net income balance compared to any other income group. Their savings potential is equivalent to 65.6% of their after tax incomes,” Standard Bank said.

Affluent households have a savings potential which is 50% greater than the other upper income group- the emerging affluent, who earn between R1,481,001 – R2,360,000 per annum.

Further, this savings potential is also 61% greater than the highest middle income group- the upper middle, who earn between R688,001 – R1,481,000 per annum.

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Here is the reason why you aren’t saving any money