Tuesday, July 16, 2024
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Imagine having a personal safety net, always ready to catch you if life throws you a curveball. That’s what saving money can do for you.

It’s like having a superpower that provides you with a sense of calm, knowing you’re covered if life decides to go off script.

With savings tucked away, you can breathe easy and dodge stress because you’re equipped to handle unexpected situations without getting into a financial bind.

Beyond Weathering Storms: Fulfilling Dreams and Enjoying the Present

But the benefits of saving go beyond just weathering storms. Think about your dreams and your bucket list.

Want to own a home someday, drive your dream car, or retire comfortably? That’s where your savings come in. It’s the fuel that propels you toward your goals and gives you the means to pursue the things that matter to you.

It’s not just about you, though. With a robust savings account, you can make dreams come true for your children too, giving them a head start in their education or enabling you to help them take advantage of opportunities that come their way.

Saving isn’t only about preparing for rainy days or dreaming of the future; it’s also about enjoying the present.

Whether you’re planning a vacation or a household renovation, your savings can make it happen. And, should something unexpected happen — like a health crisis or job loss — a solid savings habit can ensure your family is cared for.

Building an emergency fund should be on everyone’s to-do list because it’s like an insurance policy for life’s inevitable surprises.

Saving for Retirement: Reducing Tax Burden and Fostering Altruism

Saving, especially for retirement, can also reduce your tax burden. Most countries offer incentives for investing in retirement vehicles, and many employers also offer to match contributions up to a certain threshold, providing additional incentives.

On the more altruistic front, having a well-stocked savings account can empower you to help friends, family, or causes you believe in.

Saving Habits Around the World

Argentina – Weathering Economic Hurdles

Argentina has faced numerous economic hurdles in the last two decades, including bank runs, recessions, and currency devaluations. High inflation makes budgeting a challenge, and traditional saving mechanisms struggle to outpace it. Nevertheless, Argentineans held substantial amounts in savings accounts and time deposits.

France – High Savings Rates and Notoriously High Taxes

The French are known for their high savings rates, with bank deposits being the most common form of savings. France has notoriously high taxes, including income tax, social security tax, and Value-Added Tax (VAT) on most goods, which fund public benefits.

The United States of America – Slow Recovery and Increased Savings

The US economy provides limited government benefits compared to other developed nations. Americans fund their retirement via Social Security and personal savings, and they have started saving more after the slow recovery from the Great Recession.

South Africans’ Saving Habits

In South Africa, inadequate retirement provisions are a significant concern, with an alarming number of people planning to continue working due to a lack of retirement savings. Middle-income South Africans heavily relied on debt before the global Covid-19 pandemic.

Barriers to Saving in Africa

Low savings rates in Africa can be attributed to various factors, including inadequate financial services, high minimum balance requirements, and limited incentives to save. Financial literacy also plays a role in the low savings rates and high indebtedness.

The Role of AI in Encouraging Saving

The fintech space in Africa, including South Africa, has seen significant innovation recently, offering alternatives to traditional modes of saving. Open banking and artificial intelligence (AI) have made inroads into personal finance, providing data-driven saving advice.

AI’s potential to enhance saving habits lies in its ability to analyze patterns in comprehensive financial data.

AI can examine an individual’s income, spending, and saving habits, offering strategies to optimize them.

AI saving assistants can execute transfers more frequently, allowing for smaller yet more consistent savings.

AI can also assist in goal setting for significant expenses like a home or business, helping financial institutions tailor their products to meet customer needs.

AI-Powered Financial Services: A Promising Future

Intuit’s machine learning models are adapting to support the growing gig economy and unique financial management challenges faced by freelancers.

AI-powered financial services have the potential to create personalized recommendations and incentives that help customers meet their unique savings goals.

The future for AI-powered financial services is promising, with the potential to not only offer new, customized services to customers but also to drive exploration into different applications for their products.

AI can be a powerful tool to maximize savings and achieve financial goals.

By Prof. Mark Nasila, Chief Data and Analytics Officer in FNB Chief Risk Office

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