Therèse Havenga, Head of Business Transformation at Momentum Savings, sets out how much a holiday can really cost you.

I usually sleep too late when it comes to booking a holiday. I’m so task-oriented at work that holiday times seem to creep up on me. Last year I had to take my family to a farm close to the seaside – we couldn’t get dog-friendly place to stay in a coastal town at such a late stage. Worst was, there was no WiFi, no signal and no electricity. How must teenagers plan their days, then? I was not popular.

The above also meant that we had to travel more than anticipated, and spend more time in restaurants to eat cooked food (with WiFi). So much so for trying to save up and budget ahead of time.

Now, with so many changes in the financial landscape, I’ve been wondering what people do who don’t save and plan for holiday expenses upfront. Can they afford to take last-minute chances, like I do with booking a place?

I’ve asked our actuaries to do the sums. And they illustrate how hard it will be to make up for the alluring thought of going on holiday with retirement money, or on credit.

Let us consider three scenarios for accessing more or less R30 000 – you use two-pot money, you use your credit card, or you save up first. Let us also consider what the real cost of each option is.

Use two-pot money

The two-pot retirement system was introduced on 1 September 2024. Government meant the access to retirement money as emergency savings, but some people seem to think it is available as spending money. Is this a feasible option?

• Let’s assume you’ll retire in five years. You have R42 000 in your savings component of your retirement annuity and you contribute R3 000 per month.
• Let’s also assume you earn R30 000 per month. This means the tax rate you usually pay is 26%.
• The transaction costs R200 (withdrawal fee) plus the 26% tax you pay on the withdrawal.
• You will receive R30 880 when you withdraw the full amount in your savings component.
• If you had left the money to grow in the retirement annuity, it would have grown to R74 370 at a 12% growth rate before fees – let’s call this the “opportunity” cost.
• This is how much it will cost you to pay back the actual cost and the opportunity cost over the next five years : some text
  • You will need to increase your monthly contribution by another R917 to restore the original maturity value.
  • This results in a total repayment of R55 020 for the withdrawal.

Use your credit card

• Your credit card rate is probably 21,75% (repo rate of 7,75% plus 14%, as set by the National Credit Regulator).
• If you borrow R30 000 now, you will have to repay R825 per month over the next five years.
• This means to get R30 000 will cost you R49 500.
• This also means you could almost afford a second holiday with the R19 500 you’re wasting on interest: R49 500 – R30 000 = R19 500.

Save up first

• If you had been saving R370 per month for the last five years, and your investment grew at a rate of 12% before fees, you would now have R30 000.
• Your total contributions would have been R22 200.
• This means if you save upfront, your R30 000 holiday will cost you only R22 200.

This means it costs the most to “borrow” from your long-term retirement savings. Then the credit card bites you with interest to repay. By saving upfront, your holiday will cost you not only the least, but less than the actual cost.

The sums show just how much one benefits by saving upfront for big expenses like holidays, especially fancy holidays.

Now I must just do my homework in advance so that my last-minute bookings don’t cost me more after I had diligently saved for a holiday.