South Africa’s challenging economic landscape is making it difficult for many high-income earners to maintain emergency savings. Data from Standard Bank reveals that a significant portion of these individuals are financially vulnerable, with many having insufficient or no emergency savings.
Standard Bank’s analysis highlights that 52% of entry-level private banking clients have less than one month’s salary saved in easily accessible cash. This lack of savings leaves many individuals at risk of financial distress during unforeseen events, such as job loss or medical emergencies. The reliance on debt in these situations can severely impact long-term wealth-building efforts.
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Among Standard Bank’s Prestige clients, who earn between R25,000 and R58,000 per month, nearly 29% lack any accessible emergency savings. For those in the higher income bracket, earning between R700,000 and R1 million annually, over a third have no emergency savings, and 45% have savings that would last less than a month.
The importance of having emergency savings
Doret Jooste, Head of Money Management and Advisory at Standard Bank, underscores the importance of having emergency savings, stating, “The ability to build adequate cash savings for use in an emergency is not solely dependent on earning a higher income. Having cash savings on hand is the cornerstone of healthy money management and likely the most important thing to prioritise when you want to start building your wealth.”
Jooste further explains the benefits of emergency savings, emphasizing that it helps avoid costly short-term debt and allows individuals to stick to their long-term financial plans, such as saving for children’s education or retirement.
Three months worth of salary
Bridgette Kruger, Head of Private Banking at Standard Bank, suggests a step-by-step approach to building emergency savings. “Having three months’ worth of salary saved may sound daunting, but it can be built over time. First, aim to cover your fixed expenses for one month with your savings. Then, gradually increase it from there,” says Kruger.
The data from Standard Bank highlights the need for consumers to reassess their savings habits and adopt strategies that promote financial security. While the bank offers various tools and programmes to support these efforts, the key takeaway is the critical importance of having readily accessible emergency savings to weather financial storms and achieve long-term financial stability.
