How Wikipedia de­fines it

Finweek English Edition - - INSIGHT - MARC ASH­TON marca@fin­media24.com

“ONE OF SEV­ERAL terms ap­plied to the cur­rent gen­er­a­tion of young adults in West­ern cul­ture. They are so named for the fre­quency with which they choose to co­hab­i­tate with their par­ents af­ter a brief pe­riod of liv­ing on their own – thus boomerang­ing back to their place of ori­gin. This co­hab­i­ta­tion can take many forms, rang­ing from sit­u­a­tions that mir­ror the high de­pen­dency of pre-adult­hood to highly in­de­pen­dent, sep­a­rate house­hold ar­range­ments.” struc­ture was cre­at­ing an ad­di­tional prob­lem. “For too long SA’s sav­ings rates have been sig­nif­i­cantly lower than its eco­nomic and struc­tural char­ac­ter­is­tics per­mit. We’re miss­ing out on the sav­ings div­i­dend that should re­sult from hav­ing a large work­force rel­a­tive to the re­tired pop­u­la­tion – not least be­cause the high rates of youth un­em­ploy­ment means the de­pen­dency ra­tio isn’t as low as it should be.”

Iain Wil­liamson, MD of re­tail af­flu­ent at Old Mu­tual, re­cently noted young savers were a par­tic­u­larly crit­i­cal area of concern for SA. Said Wil­liamson: “Poor sav­ings habits among young peo­ple make them vul­ner­a­ble to ris­ing prices and un­pre­dicted in­come changes. Such habits can, and do, af­fect the abil­ity of young bread­win­ners to pay de­posits for large as­sets, such as homes, so harm­ing their prospects for wealth ac­cu­mu­la­tion.”

Re­search Old Mu­tual con­ducted of those fall­ing in the 18 to 24 age bracket showed only 37% had started some kind of prov­i­dent fund and just 21% had med­i­cal aid. It could be con­vinc­ingly ar­gued the need for sav­ings in that age group is per­haps over­stated. Pro­vided they aren’t in­cur­ring sig­nif­i­cant debt, the need for a re­tire­ment prod­uct or med­i­cal in­surance can prob­a­bly be off­set by some kind of “Do It Your­self” sav­ings mech­a­nism… as­sum­ing peo­ple ac­tu­ally had the self-dis­ci­pline to save.

This in­abil­ity to save is be­ing re­flected in a wider gen­er­a­tional is­sue known as “The Boomerang Gen­er­a­tion” – a cul­tural shift that’s see­ing in­creas­ingly more young peo­ple mov­ing back in with their par­ents. De­pend­ing where you look at through­out the West­ern world, and even in SA, as many as 30% to 50% of the global pop­u­la­tion is ei­ther per­ma­nently or semi-per­ma­nently liv­ing with their par­ents. While there are some ob­vi­ous co-habi­ta­tion ben­e­fits that of­ten re­sult in the par­ents ab­sorb­ing the costs of their chil­dren. In­ter­est­ingly, data sug­gests while the younger gen­er­a­tion is ben­e­fit­ing, lit­tle of that’s trans­lat­ing into a deeper youth sav­ings pool.

Though Finweek of­ten takes some flak for con­stantly push­ing Gov­ern­ment’s re­tail sav­ings bond prod­uct, the re­al­ity is it’s an im­por­tant prod­uct for SA and its beauty is its sim­plic­ity.

De­spite that it’s only at­tracted roughly 77 000 in­vestors and R9,3bn in sav­ings, which is rel­a­tively small con­sid­er­ing the as­sets in SA’s col­lec­tive in­vest­ment in­dus­try and unit trust mar­ket come in at al­most R1tn. The fo­cus on us­ing prod­ucts such as this to build a sav­ings cul­ture has been recog­nised by Gord­han, who says Gov­ern­ment is cur­rently look­ing at a top-up type sav­ings bond to at­tract smaller in­vestors.

IAIN WIL­LIAMSON

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