Beyond the Budget: why South Africa needs to incentivise household savings

In personal finance, there are a few rules that are not negotiable: don’t spend more than you earn, don’t live permanently on credit, and don’t assume tomorrow’s income will fix today’s shortfall.

As South Africa approaches the National Budget, it’s worth asking whether we – both as a government and as households – are living by those same principles. When a country consistently spends more than it earns, it borrows. When households do the same, they swipe a credit card. In both cases, the result is the same: the future gets mortgaged to fund the present.

But here’s the deeper question: how do we expect a fiscally stable country if its citizens are financially unstable?

South Africa’s household savings rate has hovered near zero for years. In practical terms, that means the average South African is saving little to nothing once expenses are paid. That is not a moral failing – it is a structural warning light.

On paper, conditions appear to be improving. Interest rates have eased. Inflation has moderated. The JSE has shown resilience. These are welcome signals.

Yet for many South Africans, the relief feels theoretical.

In my work as a money coach, I see how quickly marginal gains are absorbed. Any small saving from a lower interest rate environment is quietly eroded by income tax bracket creep – where nominal salary increases push taxpayers into higher tax brackets even though their purchasing power has not meaningfully improved. For middle-income earners, especially, disposable income has been shrinking in real terms. When salaries rise just enough to keep pace with inflation but tax thresholds don’t adjust sufficiently, there is no real wealth creation – only higher taxes.

And then there is the quiet stagnation in our savings incentives.

The annual Tax-Free Savings Account (TFSA) limit remains R36 000, with a lifetime cap of R500 000 – thresholds that have not meaningfully moved in years. In an inflationary environment, standing still is effectively moving backwards. The real value of those limits erodes over time, especially when one considers that the yearly limit has been the same since March 2020, and the lifetime cap hasn’t changed in nine years.

That lifetime cap should have been moved up to R800 000 just to keep pace with inflation – in 2025 terms, that’s the amount you would need to buy what R500,000 would buy in 2015, which is when Tax Free Savings Accounts were introduced. 

Similarly, retirement contributions remain deductible at up to 27.5% of taxable income, capped at R350 000 per year. That cap has also remained static since March 2016 and had it kept pace with inflation since 2016, it would be closer to R550,000 today. For many earners, particularly those trying to accelerate retirement savings later in life, this reduces the effectiveness of one of the few meaningful tax-efficient tools available.

If we want citizens to build resilience, we need to create room for them to do so.

Because right now, households are not just budgeting for food, transport, and education. They are funding parallel systems: alternative power, water solutions, private security, transport workarounds, healthcare gaps. These are no longer lifestyle upgrades – they are structural costs.

When people are forced to absorb these expenses, the ability to save becomes the first casualty.

A good budget should not only stabilise sovereign debt ratios or balance fiscal frameworks. It should strengthen the financial position of the average household. A country of savers is a country with capital. A country with capital invests. A country that invests grows.

Healthy household balance sheets reduce pressure on social services, deepen capital markets, and build long-term economic resilience. Retirement savings fund infrastructure. Tax-free savings fuel investment. Financially secure citizens make confident economic participants.

There is a direct line between a financially resilient population and a prosperous nation.

As we await the Budget, the hope should not only be for fiscal prudence at the top, but for policy that empowers discipline at the bottom. Proper inflation-aligned tax bracket adjustments. Updated TFSA limits. Reviewed retirement contribution caps.

These are not giveaways. They are structural incentives for responsibility.

In personal finance, we teach that small changes compound over time. The same is true for national policy.

If we want a stronger South Africa tomorrow, we must make it easier for its people to save today.

* Parry is the co-founder of Cumulate and head of financial education at Worth.

PERSONAL FINANCE