South Africans whose household budgets are taking massive strain due to Covid-19 are worried about the financial impact of their much-needed family holiday. John Manyike, Head of Financial Education at Old Mutual, urges South Africans who are struggling to consider a staycation this year. “Opting to stay home for the holidays could help repair some of the damage done to domestic incomes by the Covid-19 pandemic and lockdown,” he says.
“If your income was reduced or if you can’t really afford a visit to any of the country’s great tourist spots, then a staycation is the answer.”
If you use your imagination you can make it great fun, he says. Plus you’ll sleep better knowing you’re entering 2021 without having stretched your budget beyond its limit.
“Choosing to stay home instead of travelling means that the money you would have spent on transport, accommodation and eating out can be used for other purposes. You’ll be far less likely to overspend and incur heavy debts,” adds Manyike.
Most importantly, spending less will reduce stress. In a survey Old Mutual conducted earlier this year, 44% of respondents complained of severe financial stress.
Make sure your staycation delivers savings
Draw up a holiday budget, but don’t include the money you’re saving on travel and accommodation. Instead, use all of these savings, or a large part of them, to:
- Reduce debts that attract the highest interest. Usually, credit card debt is the most expensive. Bring the total amount you owe down with a large, single payment to reduce your monthly interest bill
- Make an additional payment on your home loan. For example, if you have a R500 000 mortgage bond, are paying 10% interest and have 20 years to run, your monthly repayment would be R4 825 a month. But if you pay in a once-off R5 000, the monthly repayment would drop to R4 777 a month. That’s a reduction of R48 a month and a whopping saving of R30 671 in the interest bill over the life of the loan.
- Make a once-off payment into a car loan. The larger the amount paid in, the lower the monthly instalment becomes. At the same time, it can shave off several months off the car’s repayment schedule, and you save on interest payments.
- Create a rainy day fund by taking the cash saved and placing it in a savings instrument so that if something unexpected happens, money is available to help solve the problem.
It’s a good idea to provide family members with a daily allowance for holiday spending to help rein in holiday spending. It’s also a great way to teach children the basics of money management. They will soon learn that deciding what to spend their cash on involves thinking about whether to keep the money for something they really want, or spending it quickly and getting no lasting benefit.
The Covid-19 pandemic and restrictions look set to continue for some time. “This means that the 39% of South Africans anxious about retrenchments or losing incomes, and 41% concerned about running out of money or savings, will continue to have these worries in 2021,” says Manyike.
“To reduce these concerns you need to take immediate action and start to save. A staycation offers an opportunity to do this.”
Although having a staycation may seem like a major sacrifice, your family will still be able to enjoy many of the treats that go with a normal holiday. Many people who have chosen this option in the past discovered great places of interest and things to do in their own home towns that they had not explored before.
“A bit of Googling should give you some great ideas for low-cost outings,” says Manyike. “With a flexible attitude you can make your staycation a positive experience, and the benefit of having more disposable income in the new year will prove to be a major benefit.”
John Manyike, Head of Financial Education at Old Mutual