How to save as a high cost of living eats at budgets

Demystifying savings and how to start your financial journey

The relatively high cost of living and the possibility of an increase in interest rates in the short-term will require consumers to review their household budgets to generate savings.

However, small, gradual changes in how you manage your day-to-day spending and how you think about money, can free up some cash flow to save.

Ester Ochse, Product Head at FNB Money Management explains that, “Households are already stretched with the ongoing lockdown and intermittent business operations in some sectors.

“There’s also been unrests in economic hubs like KwaZulu-Natal and parts of Gauteng where some consumers may come under financial pressure and are now under increased pressure. Despite the difficult times, consumers need to look at how they should spend and where they can save money. An understanding of your basic household needs could help eliminate unnecessary spending.”

According to FNB Economist, Koketso Mano, “After accelerating to 5.2% y/y in May, consumer price inflation eased to 4.9% in June. The pace of housing inflation is faster than anticipated with food inflation remaining elevated.

“In spite of the risks to the upside, we expect headline inflation to continue slowing for the remainder of this year, as fuel and food inflation moderate from recent highs, and core inflation remains benign.”

How to save as a high cost of living eats at budgets

Ochse highlights four areas on how you can save during these challenging times

  • International Travel/holidays: The global pandemic has restricted travel with stringent requirements where it is allowed. Whilst your travel luggage may be collecting dust, your holiday budget should be growing. Following the ease of interprovincial travel, you can also explore local tourism or traveling within your province or South Africa with some of your holiday budget.
  • Entertainment: With places of entertainment including restaurant dining restricted to prevent the increase in Covid-19 cases, many consumers may choose to stay at home. Get the family involved in cook at home, which will be a dual purpose of entertainment for the kids and saving money. 
  • Clothing/footwear: Look at items that you can use at home and at the office. The dual-purpose outfits will help you save a few Rands and keep you stylish at the same time. You can pick up bargains with the recent online sales.  
  • Fuel: Given the lockdown restrictions and work from home options, Ochse advises that you add your monthly travel or petrol budget into a savings account. This can be accessed at a later stage or can be used for emergencies.

Ochse adds that, “Consumers should consider using points earned through rewards programmes like eBucks as an alternative when purchasing food or fuel instead of using cash which could help you save a bit more. The freed-up cash flow can then be added to savings or paying off debt.

“In addition, the unchanged interest rate by the South African Reserve Bank (SARB) offers consumers the option of balancing and reducing their debt or saving for an emergency. The SARB also forecasted that we are likely to see interest rates rising from the last quarter of 2021, consumers are advised to factor this for future expenses. 

“Pivotal to this is managing your monthly budget and sticking to your short and long-term goals, consumers can use the innovative nav» Smart Tools on the FNB App to help them manage their money better through dynamic budgeting,” concludes Ochse.

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