If you grew up in the early 2000s or before you might remember the piggy bank. For many, it was the first lesson handed down by parents on how to save money. One would gather two rand, one rand or five cent coins and drop them into the piggy bank. Once it was full it was off to the bank to deposit the coins into a bank account.
However, with the rise of digital technology, saving and investing can be done at the touch of a button. Despite this, many South Africans still trust traditional forms of savings. This begs the question of whether there is a lack of understanding around how easy digital tools make saving and investing. Four industry leaders discuss.
Traditional savings methods aren’t understood
“A recent study on South Africans’ savings habits found that while many want to save, they find formal savings offerings to be overly complex and intimidating. For others, the study reveals a lack of understanding regarding how traditional savings accounts help individuals reach their financial goals,” says micro-savings app upnup’s Head of Marketing and Strategy, Justin Asher.
According to these studies, despite the various attempts by banks and institutions to attract users to their savings tools there is still dissonance around consumers opting into these savings tools. In order to help consumers to save, banks and savings platforms are looking at automated savings. These are savings where customers can select to either round-off or add up their spend to the nearest rand, in options like R10 and R20. With each transaction savings are automatically sent to a savings wallet.
The average consumer likely accumulates multiple transactions on a daily basis, and as a result of the pandemic, a large portion of these transactions are made using cards. Some platforms allow consumers to diversify their savings by transferring them into bitcoin or points for items like petrol or groceries.
“The upnup platform operates solely off the user’s bank account transactions. As you accumulate daily transactions, the platform accumulates daily savings. It’s like tipping yourself for good work at the till point. Instead of spending your tips right away, you invest them in Bitcoin, a non-traditional asset whose growth has exceeded expectations, and one that the world is slowly adopting more and more,” says Asher.
This is precisely why micro-saving and investing using digital over traditional bank or ATM deposits makes perfect sense.
Flexible alternatives for debt avoidance
No matter how well many of us aim to manage our personal budget, unforeseen expenses always come up. Replacing appliances, electronics, and furniture typically requires a large upfront cost, with the only way of managing it being through high-interest credit.
But there’s another option, one that’s gaining traction both locally and internationally. Rent-to-own is a transactional model employed by Teljoy that allows consumers to access goods on a flexible monthly basis. Rather than purchasing a television outright, consumers can digitally subscribe to the items on a month-to-month basis with all the maintenance and insurance costs built into monthly premiums.
“Our subscription model prioritises access over ownership, allowing for unlimited use of the unit for no more than the cost of the monthly premium. It’s increasingly the way consumers across the globe are choosing to use electronics, appliances, furniture and even fashion and leisure equipment,” explains Jonathan Hurvitz, CEO of Teljoy.
Variety through digital for long term payments
With added petrol costs not everyone can afford to repeatedly visit the bank to discuss home loan options with their financial advisor. It’s now possible to apply for a bond online at a time that is most convenient. “We have seen that buyers want greater control over the homebuying process and this means increased use of digital platforms that can take them through the application process end-to-end,” says Carl Coetzee, CEO of BetterBond. No one wants to submit reams of paperwork and then have to wait for a response. Online applications are quicker and simpler.
Aside from the convenience of being able to manage the process themselves, applicants also have a better chance of securing a competitive interest rate for their bond. BetterBond applies to multiple banks on the applicant’s behalf, negotiating to get their clients the best deal. BetterBond also offers several useful online calculators to help applicants work out how much they can afford, what their interest will be over their required loan period and how much they need for a deposit. “Convenience, competitive rates and cost calculations are now possible at the click of a button. Having a less onerous application process has encouraged more aspirant homeowners to apply for a bond and start their homeownership journey,” says Coetzee.
Digital tools are helping consumers to save more
Some brands give consumers added bonuses for downloading and making use of their apps. The MiWay Blink app for example includes added bonuses for consumers and gives customers access to emergency assistance at all times – for example, they are covered if they run out of petrol or if their car breaks down, or if they get involved in an accident. Furthermore, a customer may qualify to receive a cashback paid into their bank account every month, for the kilometres they don’t drive – if their driving for the month is less than the base amount. The less you drive the more you get. The app does all the magic in the background.
Head of MiWay Blink, Keletso Mpisane says, “You get to pay for insurance according to the kilometres you drive, which allows you to manage your budget better and save money. The app is also a portal to comprehensive car cover against accidents, vandalism, theft and hijacking, fire and explosion, weather damage and animal accidents. The app allows the customers to get in touch with the insurer, wherever and whenever they are, should there be a need.”
The benefits of digital forms of saving on insurance, appliances and investments are plentiful. Whatever their financial goals, consumers wanting to save and invest should look to digital for options to save costs and build financial security.
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