The repo rate was cut by 25 basis points to 6.5% during the latest Monetary Policy Committee (MPC) meeting of the South African Reserve Bank (SARB). Compared to most countries, South Africa still has a high enough interest rate which should encourage consumers to save more.
“Your savings principles should remain at the core of your saving strategy and should not be deterred in the event of a interest rate cut. The fundamentals of savings coupled with achievable savings goals should be practiced daily; and shouldn’t be ignored,” says Himal Parbhoo, CEO Retail Cash Investments.
The SARB’s decision to lower the repo rate does affect the interest that consumers earn on savings and interest on monthly repayments on existing debts like car finance, credit card balances and home loans. Interest is simply the cost of borrowing money and this is influenced by the supply and demand of goods and services and macroeconomic conditions. When demand is low, institutions charge less to part with cash but when the demand is high the interest rates increase.
“Savings principles like budgeting accordingly, monitoring your expenses regularly, reviewing and refreshing your savings plan and catering for emergencies should be part of your savings plan. Added to this is ensuring that you have achievable short and long-term goals. These are good money management principles and we encourage all our customers to embrace them,” says Parbhoo.
Enhancing the South African savings culture through innovative platforms is a core focus for the bank. The bank recently revealed that South African consumers have shown a strong appetite to save after its customers initiated nearly 20 000 savings goals in just a few days since the launch of the Savings Goals feature on the Bank’s App. To date, some of the top Savings Goals that have been chosen by consumers include: saving for a car, travel, home improvements, emergencies and education.
“With the ongoing need to save more and reduce debt customers can save for the things that they desire the most. It’s never too late to save, so adhere to those savings principles and make saving a priority,” concludes Parbhoo.