THE bad savings culture among young people is expected to be a kink in the chain for the potentially ground-breaking Tax Free Savings and Investment Accounts.
Finance Minister Nhlanhla Nene eagerly dropped the news in his Budget speech last week, excited to introduce the first of its kind in South Africa.
That week economists dominated talk radio and television, weighing pros and cons. The more optimistic ones were quick to encourage young people to take up the challenge, insisting the money saved into the coffers would not draw income tax, dividends tax or capital gains tax.
It sounds like an interesting deal. Each person is allowed to save up to R30000 a year with the investment's limit set at R500000. That is not the only perceived advantage.
Consumers are not contractually bound to save amounts they cannot afford, eliminating possible penalties or obligations. There are also no restrictions when it comes to making withdrawals.
The weak link of this well-designed chain is the people who need it the most: those under the age of 30 with little or zero savings in the bank for a rainy day.
The savings culture in South Africa is poor compared with other emerging countries. Mzansi's middle-class is constantly using credit to maintain a lifestyle beyond its means.
The Debt Counselling Association of SA says the number of people applying for debt review increased to 14000 a month this year from 11000 a month last year.
Why do young people continue to buy flashy cars, designer clothes and party at least two nights a week when they should rather be tightening their belts?
A 2014 Stellenbosch University study by the institution's Bureau of Economic Research attempts to explain the psychological reasons behind SA's culture of consumption, especially among the youth.
The research concludes that reckless spending by the emerging African middle class derives from a need to acquire goods they previously didn't have. Young people have a desire to show off their level of success by buying expensive items they cannot afford.
This "desire for recognition" was perhaps well explained by German philosopher Georg Hegel. According to Hegel, humans have a natural wish to be desired or viewed positively by other people. People depend on their peers to develop an identity, or what is often referred to as self-esteem.
Hegel asserts that those who fail to receive recognition through societal norms and values, will find it hard to feel worthy.
The 2015 Youth Psyche Report by marketing agency Branded Youth bears testament, saying the youth's spending habits are affected by technology.
Its most concerning trend is how social media are shaping the spending behaviour of consumers. The youth's lifestyle choices driven by social media are perpetuated by a fear of being irrelevant, according to the report.
Altering SA's bad savings culture will certainly be no easy task because it requires starting with changing the consumerist mindset of young people.
Unfortunately for the black middle class, their financial obligations stretch far beyond them.
From helping parents pay off a house or taking on a new job with an outstanding student loan, they are forced to live in the now. And according to this kind of thinking, the future will sort itself out.
lGumede is a freelance writer and a radio talk show host
For more stories like this one, be sure to buy the Sowetan newspaper from Mondays to Fridays
Tame incentives won't make flashy youth save
THE bad savings culture among young people is expected to be a kink in the chain for the potentially ground-breaking Tax Free Savings and Investment Accounts.
Finance Minister Nhlanhla Nene eagerly dropped the news in his Budget speech last week, excited to introduce the first of its kind in South Africa.
That week economists dominated talk radio and television, weighing pros and cons. The more optimistic ones were quick to encourage young people to take up the challenge, insisting the money saved into the coffers would not draw income tax, dividends tax or capital gains tax.
It sounds like an interesting deal. Each person is allowed to save up to R30000 a year with the investment's limit set at R500000. That is not the only perceived advantage.
Consumers are not contractually bound to save amounts they cannot afford, eliminating possible penalties or obligations. There are also no restrictions when it comes to making withdrawals.
The weak link of this well-designed chain is the people who need it the most: those under the age of 30 with little or zero savings in the bank for a rainy day.
The savings culture in South Africa is poor compared with other emerging countries. Mzansi's middle-class is constantly using credit to maintain a lifestyle beyond its means.
The Debt Counselling Association of SA says the number of people applying for debt review increased to 14000 a month this year from 11000 a month last year.
Why do young people continue to buy flashy cars, designer clothes and party at least two nights a week when they should rather be tightening their belts?
A 2014 Stellenbosch University study by the institution's Bureau of Economic Research attempts to explain the psychological reasons behind SA's culture of consumption, especially among the youth.
The research concludes that reckless spending by the emerging African middle class derives from a need to acquire goods they previously didn't have. Young people have a desire to show off their level of success by buying expensive items they cannot afford.
This "desire for recognition" was perhaps well explained by German philosopher Georg Hegel. According to Hegel, humans have a natural wish to be desired or viewed positively by other people. People depend on their peers to develop an identity, or what is often referred to as self-esteem.
Hegel asserts that those who fail to receive recognition through societal norms and values, will find it hard to feel worthy.
The 2015 Youth Psyche Report by marketing agency Branded Youth bears testament, saying the youth's spending habits are affected by technology.
Its most concerning trend is how social media are shaping the spending behaviour of consumers. The youth's lifestyle choices driven by social media are perpetuated by a fear of being irrelevant, according to the report.
Altering SA's bad savings culture will certainly be no easy task because it requires starting with changing the consumerist mindset of young people.
Unfortunately for the black middle class, their financial obligations stretch far beyond them.
From helping parents pay off a house or taking on a new job with an outstanding student loan, they are forced to live in the now. And according to this kind of thinking, the future will sort itself out.
lGumede is a freelance writer and a radio talk show host
For more stories like this one, be sure to buy the Sowetan newspaper from Mondays to Fridays
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