Thanks to the sudden and widespread financial insecurity triggered by Covid-19 and the national lockdown, many of us have been brought face to face with the reality of our financial vulnerability.
With no guarantee of a paycheck at the end of the month, we belatedly realise the importance of having saved for that ‘rainy day’. Those with healthy savings have a much better chance of weathering the Covid-19 storm, while those who put off this vital aspect of planning for the future – or worse, have been overspending on credit for years – face a very anxious time indeed.
No more paychecks
If nothing else, the financial implications of widespread retrenchments and job losses offers us a glimpse of what our lives will be like when we retire. When there are no more paychecks … ever. And it’s not an encouraging picture.
South Africans are notoriously bad about saving for retirement. Only about 6% of the population have saved enough to be able to retire comfortably. The vast majority have no formal plan on how they will fund their retirement. Or how they will manage on a government old age grant of just R1 700 per month!
Old Age Grant
If you consider that a decent medical aid alone costs more than R1 700 per month – and that’s before you’ve paid rent/levies, electricity and water, food, clothing and other essentials – you don’t have to be a financial genius to understand that retirement is going to be a time of deprivation and extreme hardship … unless adult children and other family members step in to help.
For those working for minimum wage, or barely making ends meet as it is, saving for retirement is simply not possible. But this lack of saving is not just an income issue. People in the mid to high income brackets are equally guilty of failing to plan adequately for their retirement. Unrealistic expectations, financial ignorance and ill-discipline all play a part.
Are you on track?
Even those who do have retirement savings often fail to monitor their progress. Most have no idea whether or not they are on track to meet their goal to be able to support themselves in retirement. And the problem is compounded by not knowing how many years we have to plan for. There’s a big difference between funding five or ten year’s retirement (assuming we die between the ages of 70 -75) or having to make our savings last for 20-30 years, should we live well into our 80s or 90s.
By forcing people to suddenly cope with dramatically reduced income, the Covid-19 pandemic has fast-forwarded South Africans to a potential future where they no longer have an income, and little to no savings to fall back on. But the lessons we have learned from the current situation may just save us!
Learning to live with less
Hopefully people who have had to downgrade their lifestyle will take the lesson to heart; it’s possible to live on a lot less than we thought possible.
Do we really need a new car every few years, wardrobes full of designer clothes, all the latest electronic gadgets, or expensive overseas holidays? By cutting back on spending and putting the money we save into an investment account, we’ll not only cushion ourselves from life’s unexpected ups and downs – we’ll hopefully be better prepared to retire comfortably when the time comes.
If you are over the age of 60 and are in desperate need of help with accommodation and other necessities of life, please contact firstname.lastname@example.org.