The psychology of saving


South Africans are well used to hearing that they don't have a great savings culture. The good news is that there has been a slight uptick in South Africans' savings habits.

The South African Reserve Bank (SARB) statistics show that the household savings rate inched up to -0.3% in the first quarter of this year from -0.5% in the last quarter of 2016. The South African Savings Institute's chairperson, Prem Govender, says this tiny improvement in savings culture coupled with an overall reduction in household debt paints a picture of hope.

A key factor that plays a role when it comes to the psychology of saving is different money personalities. Gerda Nel, chairman of the Institute of Behavioural Finance, explains that behavioral finance is not about how you should act but rather about how you do act. She explains that the brain is wired like a computer and people rely on certain triggers from their environment to access certain information.  

According to Scott and Bethany Palmer, also known as the "Money Couple", there are five basic money personalities:

The saver: Also referred to as a penny-pincher, this person looks for good deals and carefully assesses the value of a purchase before spending any money. They love a bargain and take pride in how much they can save.

The spender: They enjoy spending money for their own benefit and for the benefit of others. Their thinking is that life is meant to be enjoyed and they live very much in the present moment. Instant gratification is what they seek.

The security seeker: This is someone with a cautious risk profile, who makes calculated decisions after much research. They look ahead to the future and believe in planning and research so that they can be sure they are making the right choices.

The risk taker: More of an aggressive risk personality, the risk taker is prepared to take calculated risks and believes in waiting for the "big pay-off". Most entrepreneurs fall in this category.

The flyer: This person is simply unconcerned about their finances. They believe that money will take care of itself or are happy to leave the financial decisions to someone else entirely.

The trick is to be aware of what your savings personality is and then try to remove your emotions and your inherent bias when you are making financial decisions. Your financial adviser has a key role to play here in terms of keeping you focused on your financial goals and guiding you to make logical choices that are right for your financial plan.

How clients can avoid common savings mistakes:

  • Don't make investment decisions on the same day a significant event takes place in your life, which could cause you to become emotional.
  • Be aware of your mental accounting habits. People treat hard-earned money conservatively while they tend to treat "easy" money or windfalls more recklessly
  • Don't try to time the market. You need to stick to your financial plan and stay invested for the long-term.

Sources: Institute of Behavioural Finance, South African Reserve Bank first quarter bulletin for 2017, SA Savings Institute.

Nothing contained herein should be construed as financial advice and is meant for information purposes only.

Discovery Life Investment Services Pty (Ltd), branded as Discovery Invest, is an authorised financial services provider. Registration number 2007/005969/07


Related articles


How to save during a recession

On the back of National Savings Month in South Africa, a recent report from the World Economic Forum (WEF) highlights the startling gaps between financial needs in retirement and what consumers are actually saving.


What every new investor should know

Saving and investing are crucial to ensuring a secure future for yourself. Right from the day you get your first salary cheque, the biggest favour you can do yourself is to start saving and investing. The earlier the better.


Improve your financial IQ

The thrill of earning your first salary is huge. But not everyone manages to get their money to cover their expenses and to provide for a rainy day. Two things are really important here ? becoming financially literate, and making and sticking to a budget.

Log in

Please click here to login into Discovery Digital Id

Please click here to login into Discovery Digital Id