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It is difficult not to feel fortunate to live in the modern world where healthcare is sophisticated, travel is easy and technology simplifies so much. We are an enormously long way from just 150 years ago when penicillin did not exist, overseas travel meant spending months on a ship, and Thomas Edison had not yet invented the electric light bulb.

With money comes responsibility

This is a world in which having even a little bit of money gives us access to a lot more than anybody could have dreamed of before the turn of the last century. That is a great blessing, but it also brings with it a very large challenge. Having access to so much means that there is no end to the things on which we can spend our money. We are a world of consumers, and we are encouraged to consume more at almost every turn.

The result is that we believe that the more we are able to buy, the richer we are, and so we equate income with wealth. However, the truth is that being wealthy is not about how much you spend. It is rather about how much you are able to save.

South Africans GDP

As South Africans, we have a big problem in this regard. Our savings rate at 15,4% of GDP is amongst the worst in the world. This is not because we don’t earn enough or our cost of living is too high. In China, earnings are lower, but the savings rate is 50% of GDP. In Australia, where the cost of living is much higher, the savings rate is 22,5% of GDP.

SA and its debt problems

A big part of our problem is that we are too easily seduced into debt. Household debt as a percentage of household income in South Africa is now at 80%. We are borrowing more than we are saving. That may mean that we have money to spend in the short term, but in the long term, we will be far poorer for it. We are making the wrong choices with our money.

The wealthy are misunderstood

In their book “The Millionaire Next Door”, Thomas J. Stanley and William D. Danko point out that wealthy people are not the ones who make fancy lifestyle choices and spend on assets that don’t appreciate. They are the people who spend less than they earn, and get more pleasure from owning assets that grow in value like stocks, property and private businesses than from displaying a high-consumption lifestyle.


That doesn’t mean that you shouldn’t enjoy life, but rather that you should only spend what you can afford, and most importantly save for yourself first. Anything else is really just stealing from the future you to pay for your current pleasure.

Words: Patrick Cairns

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