When people don\u2019t build retirement savings, it affects not just them personally, but their legacy and the wider economy. Here\u2019s why it\u2019ll take the combined efforts of us all to grow the economy for ourselves \u2013 and for the next generation.<\/p>\n
According to South Africa\u2019s National Development Plan, our economy needs to grow at a rate of 5.4% to provide growth in employment and real incomes. Needless to say, we\u2019re not there yet \u2013 but research shows smarter savings behaviour could have this very effect on the economy.<\/p>\n
According to Discovery Invest\u2019s Head of R&D, Craig Sher, if everyone in South Africa saved an appropriate percentage of their income towards important savings goals, including retirement, children\u2019s education, and housing, the country would have a pool of long-term savings that could be productively invested.<\/p>\n
\u201cIn fact,\u201d he continues, \u201cthe rate of investment that could be achieved from that pool would be in the region of that required to sustain GDP growth of the targeted 5.4%.\u201d<\/p>\n
To even begin understanding how retirement savings can affect economic growth, we need to address the unhealthy financial behaviours many South Africans are prone to.<\/p>\n
The first is a lack of future orientation, says Sher. We have complex and competing financial needs when it comes to living standards, education, providing for unforeseen life-changing events, medical expenses and so on \u2013 and retirement needs just don\u2019t seem tangible enough to prioritise.<\/p>\n
\u201cThe problem is that when they do become tangible, it\u2019s usually too late. The longer we take to start saving enough, the more money it takes to achieve the same retirement outcomes \u2013 money most people don\u2019t have.\u201d<\/p>\n
When people don\u2019t save enough for retirement, their families take the toll. Parents become dependent on their children. These children, called the \u2018sandwich generation\u2019, carry the double financial burden of providing for both their parents and their own children.<\/p>\n
In South Africa, about 28% of working people carry this burden. When sharing a salary with your immediate and extended family is a reality for so many, the prospects of saving enough to create your own wealth are low \u2013 and when you don\u2019t save enough for your own retirement, the cycle continues.<\/p>\n
Like retirement, this often seems an abstract concept that is difficult to appreciate. Most people don\u2019t equate it with real-world examples, like: \u201cIf my child has to support me when I retire, they have less to spend on schooling for my grandson. My grandson may not get a good job later in life because I\u2019m not saving enough for retirement now.\u201d<\/p>\n
Conversely, each person empowered to make better money decisions has an impact on their own and their family\u2019s lives \u2013 potentially for generations to come.<\/p>\n
And when enough people save adequately, explains Sher, they have the collective potential to change the development course of the country by providing an investment pool that funds economic growth.<\/p>\n
\u201cRetirement savings are both a personal and national imperative.\u201d<\/p>\n
Studies show that retirement remains a crisis for most South Africans. This means the retirement industry has not yet been able to help the majority of investors overcome the challenges of defined contribution retirement funds.<\/p>\n
But, Sher says, \u201cwithin crisis lies opportunity for innovation.\u201d<\/p>\n
\u201cWith Discovery Invest, for example, we use powerful incentives that drive behaviour change in individuals, helping them make better decisions for the future by making investment decisions today. By doing so, we\u2019re helping them \u2013 and ultimately the country and us all \u2013 by creating wealth and empowering people to truly retire well\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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