Spender or Saver – which one are you?

designbythink 2016, Quarter 3 Newsletter 2016

Spender or Saver – which one are you?

It’s no secret that many South Africans are big spenders but not big savers.

Recently the Fund rolled out a Financial Wellness programme of 5 steps to encourage you to re-examine your relationship with money. You can find these steps on Imbizo or on www.wgrf.co.za.

IT’S NOT HOW MUCH MONEY YOU HAVE, BUT RATHER WHAT YOU DO WITH IT THAT COUNTS.

What is conspicuous spending?

CONSPICUOUS SPENDING IS WHEN WE SPEND MONEY TO BUY LUXURY GOODS FOR ‘STATUS’ AND TO ELEVATE OUR SOCIAL STANDING.

Whether we like to admit it or not, we’re all guilty of buying things we don’t need in order to keep up with those around us.

  • The culture of conspicuous spending is driven by daily messages to buy goods and spend more.
  • We live in a world where the economy relies on people to spend, and so we are constantly bombarded by messages to consume.
  • Things that we don’t really need become ‘necessities’ because we are told over and over again that immediate gratification is normal.
  • Social media contributes largely to our perception that it’s okay to live beyond our means. We see other people’s behaviour on a daily basis and think ‘everybody else spends’ and so we should spend too.

WEALTH IS NOT WHAT YOU SPEND, IT’S WHAT YOU SAVE.

The biggest problem with this trend is that we tend to spend money to gratify our immediate wants, rather than long-term needs like buying a house or saving for retirement.

To quote Steven Nathan, the chief executive of 10X Investments:

‘When my children have referred to other people as richer than us, I say to them: We don’t know that. What we do know is that they spend more than we do.’

We get trapped!

How do we find ourselves in this position and why is conspicuous spending becoming such a damaging trend?

  • Our increasing access to credit and borrowed money makes it very easy to buy without having the cash on hand (or in the bank).
  • Technology has also allowed us to spend without much thought. For example, Internet shopping is instant and being able to ‘mindlessly swipe’ a card is easy to do, without really thinking of the long-term consequences.
  • More than ever, young people have ‘the power of spending’ because they have grown up with access to credit and have become conditioned to prefer gratification over saving.

Change this mindset

Not everyone is a natural saver, therefore education is the key to teaching young people to change their attitudes.

We need to make young people more mindful of the future and teach them that happiness today may come at the cost of financial unhappiness tomorrow.

Early education makes young people better equipped to make the right financial decisions. They need to understand what budgeting is, how interest works and how to plan for the future so that their money grows.

Role models can also change the mindsets of young people and can use social media to send positive messages about saving rather than conspicuous spending.