Seven Survival Tips to Stretch Your Salary Until the Next Payday

Every July marks Savings Month, which encourages South Africans to increase their future savings. This year, the focus should be on the importance of preserving existing savings and the dangers of prematurely withdrawing funds from a pension fund.

Savings Month annually calls on South African citizens to consider saving more money. However, this year, attention should be drawn to a less discussed topic—the already accumulated funds and the real danger of spending them too early.

The Two 'Bucket' System

If you are a member of your employer's pension fund, you have likely heard about the two 'bucket' system for retirement. Starting in September 2024, your pension contributions are divided into two parts: a pension component that cannot be accessed before retirement, and a savings component that can be used once a year in amounts of at least R2,000. This system was created as a safeguard for genuine financial emergencies, and for many people, it served precisely that purpose.

The Savings Fund is Not an Expense Fund

Nevertheless, an honest conversation must take place. The fact that you can access the savings component does not mean you should. It should be viewed more as a fire extinguisher intended for emergencies, rather than for daily use. The problem is that life presents us with many situations that seem urgent but are not—for example, a long-planned vacation, a car upgrade, or unexpected school fees. Although all these circumstances are real, using pension savings to cover them is like using a fire extinguisher to cool coffee: it works, but then you won't have it when you truly need it.

Financial Calculations and Consequences

It is important to look at specific figures. Imagine you have 15 years until retirement, and you withdraw R50,000 from the savings component today. Although the amount seems manageable, if those R50,000 remained in the pension fund and grew at an average annual return of 10%, by the time of retirement they would be worth approximately R209,000. Thus, you are not just spending R50,000, but effectively R209,000 of your future self's money.

The Double Whammy at Retirement

The most unexpected aspect is the double whammy at retirement. Many count on receiving a portion of their pension savings as a lump sum, which they use to pay off a mortgage, clear a car loan, or cover large expenses upon leaving work. This is a moment of significant financial relief, and many pension plans were built with this in mind. However, your savings component is that lump sum. If you withdraw funds from it before retirement, you are not just reducing your monthly pension income; you are spending the cash amount you planned to have on the day of retirement. Thus, the R50,000 you need today could have turned into R209,000 at retirement, ready to cover part of the debt and ensure a clean start to retirement. Instead, those funds disappear, and your future self is left without them.

When You Have to Choose

It must be acknowledged that sometimes life truly leaves no other choice. Job loss, a medical emergency, or a family crisis are real events, and the savings component exists precisely for such moments. There is no shame in using it when absolutely necessary. But before making such a decision, ask yourself a series of honest questions: have you considered temporarily cutting back on expenses? Can a short-term personal loan cover the gap, which can be repaid in a few months without touching pension savings? Is there support from family, employer, or community funds? And have you consulted a financial advisor who can help see the full picture?

The savings component should be the last door you open, not the first.

Savings Are Also Decisions

Savings Month also reminds us of the importance of preserving what we have. We tend to view savings as an active action—making a deposit, automatic deduction, or deciding to set aside money. However, saving also includes decisions about what to avoid: refusing to withdraw funds, resisting temptations. In this Savings Month, before thinking about how much more you can contribute, take time to reflect on what you already have and what potential it holds if you let it work. Sometimes the strongest financial decision is the one you decide not to make.

July has been declared National Savings Month in South Africa, marking a time to review financial strategies and improve saving habits. This month encourages citizens to find effective ways to increase retirement savings, utilize tax-free accounts, and explore investment tools such as ETFs to build long-term capital.

The Importance of Financial Discipline

National Savings Month serves as a reminder that financial security begins with establishing sustainable saving habits and making informed investment decisions. Amid rising costs of living and economic uncertainty in South Africa, it presents an opportunity to pause, analyze one's financial plan, and ensure all available tools for saving and investing are being utilized.

Whether you are saving for retirement, aiming for long-term wealth accumulation, or investing for future goals, small but regular financial decisions can have a significant impact over time. National Savings Month is ideal for reassessing your savings strategy and ensuring your money works as hard as you do.

Overview of Retirement Savings

Retirement savings remain one of the most effective and least taxed ways to achieve long-term financial stability. Contributions to pension funds are deductible from taxable income up to the current annual limit of R430,000, making annuities and corporate pension funds valuable tools for both wealth creation and tax planning.

National Savings Month provides an ideal opportunity to check your pension contributions and ensure they align with your long-term financial objectives. Even a modest increase in monthly contributions can have a significant effect over time due to the combination of tax efficiency and compound interest.

Maximizing Tax-Free Accounts

A Tax-Free Savings Account (TFSA) represents another effective method for South Africans to build a long-term investment strategy. Since investment gains grow without being subject to income tax, dividend tax, or capital gains tax, the TFSA offers a powerful way to maximize investment growth over the long term.

Investors can currently contribute up to R46,000 per year, with a lifetime contribution limit of R500,000. Maximizing this annual limit, if budget allows, can significantly enhance long-term investment returns through the power of compounding. For investors who make contributions via monthly direct debits, National Savings Month is a good chance to review contributions and ensure they align with the plan to utilize the full annual limit before the end of the tax year.

Considering ETFs in Your Strategy

July is also a suitable time to explore investment options that make building long-term capital more accessible. One option gaining significant popularity is the Exchange Traded Fund (ETF), which offers investors an affordable, transparent, and diversified way to participate in financial markets.

An ETF is a collection of investments, such as stocks, bonds, or commodities, bundled into a single fund and traded on the Johannesburg Stock Exchange (JSE). Like listed stocks, ETFs can be bought and sold during the trading day, providing investors with instant diversification across multiple underlying assets. ETFs have helped democratize investing by making professionally managed, diversified portfolios accessible to a larger number of South Africans. Whether you invest R100 or R10 million, every investor has access to the same fund, under the same conditions, and with the same management fees. This is a vital step toward greater financial inclusion.

For investors looking to build capital over time, ETFs can be an effective addition to a long-term savings strategy. Their relatively low costs, transparency, and ease of access make them particularly attractive to novice investors, while experienced investors use them to diversify portfolios both locally and globally. Unlike many traditional investment products, ETFs do not have multiple fee classes; every investor pays the same percentage management fee regardless of the investment amount.

As with any investment, it is crucial to understand what you are investing in. Investors should take time to study the underlying assets, the level of risk, and how the ETF aligns with their long-term financial goals.

Global Diversification Abroad

A well-diversified investment portfolio extends beyond local markets. South Africans can currently invest up to R2 million annually overseas under the Single Discretionary Limit without needing SARS tax clearance, offering greater flexibility for diversifying across international markets and currencies.

While international investing may not be suitable for every investor, global diversification helps mitigate concentration risk and provides access to sectors, industries, and growth opportunities that might not be available in the domestic market. As part of an overall savings strategy, it is worth considering whether your portfolio has the right balance between local and international investments.

The Power of Consistent Saving

One of the greatest advantages any investor has is time. Regular contributions combined with the power of compound interest can significantly enhance long-term investment returns. The earlier you start saving and investing, the longer your money will have to generate income and, importantly, earn income on that income.

National Savings Month reminds us that successful investing is not just about guessing the market or chasing short-term profits. It is about forming disciplined saving habits, consistent investing, and regularly reviewing your financial plan to ensure it meets your objectives.

Saving money is a difficult process in itself, so it is crucial to protect the achieved financial progress from the actions of scammers. According to the 'Debt Rescue Consumer Savings Survey' for 2025, only 18% of South Africans save more than 10% of their monthly income, and 27% have no savings at all.

Financial situation in South Africa

According to the National Treasury estimates, only about 6% of the South African population will be able to retire with sufficient income to maintain their usual standard of living. For many South Africans, every saved unit represents the result of careful budgeting, sacrifices, and long-term planning. However, these savings can be lost in minutes if scammers gain access to personal information or convince someone to invest in a fraudulent scheme.

Threats in the digital world

As consumers increasingly use online banking, mobile payments, and online investments, criminals are developing more sophisticated methods to target savings. Shaun Pillay, Head of Fraud Risk Management at Standard Bank Group, notes that years of careful financial planning can be destroyed in just a few minutes through a convincing phone call, text message, or fake investment opportunity.

The most common types of fraud include phishing attacks, scams via WhatsApp, impersonation, SIM-swap fraud, investment offers with unrealistic returns, and fake online shopping deals. These schemes use deception to obtain money, personal data, or account access, often relying on social engineering that exploits trust, urgency, fear, or greed.

Measures to protect savings

Pillay emphasizes that the most important step in protecting savings is constant vigilance. One must be skeptical of unsolicited messages, especially those demanding immediate action or offering rewards. Users should avoid clicking suspicious links or downloading attachments from unknown senders. Any request for personal information, account details, or payment should be verified directly through the organization's official contacts.

It is also recommended to maintain good digital hygiene: never disclose your PIN, passwords, or one-time codes to anyone. It is important to use strong, unique passwords for each account and employ password managers. Where possible, activate multi-factor authentication on banking, email, and social platforms. Furthermore, one should avoid financial transactions over public Wi-Fi and always check website addresses, as fraudulent resources often mimic legitimate ones, for example, by using the .co domain instead of .com.

Monitoring and consultation

Protecting savings also requires regular monitoring of financial records. Bank and investment statements should be reviewed frequently, suspicious activity reported immediately, and documents containing confidential information destroyed before disposal. When working with a financial advisor, it is important to verify their credentials through the Financial Sector Conduct Authority (FSCA) and ensure they are authorized to provide financial advice. It is also worth clarifying how the advisor is compensated and what measures they recommend for protecting finances.

Fraud prevention should become part of any discussion about financial future. Questions should be asked about new scam schemes, how to verify messages from financial institutions, and what to do if an unsolicited investment offer is received or fraud is suspected. Awareness of fraud threats is an integral part of financial planning, helping to preserve achieved financial progress.