Most South Africans are not sav­ing at all

Weekend Argus (Saturday Edition) - - GOODPASTIMES -

Sav­ing lev­els in South Africa con­tinue to de­cline, ac­cord­ing to re­search by Fin­Scope and Old Mu­tual.

The Fin­Scope re­search says that 62 per­cent of peo­ple sim­ply do not save. Of those who do save, al­most 13 per­cent do not use for­mal sav­ings prod­ucts but “keep their money un­der the mat­tress”, while al­most 10 per­cent use in­for­mal prod­ucts, such as burial so­ci­eties and stokvels,

The Fin­Scope re­search re­veals that there has been a growth in in­for­mal and un­der-the-mat­tress sav­ing, with many peo­ple hav­ing to save for ne­ces­si­ties, such as food.

Old Mu­tual’s re­search, which was re­stricted to the metropoli­tan ar­eas, found that one in two work­ing house­holds that had been sav­ing, saved less over the past year, while only one in 10 house­holds is sav­ing more than a year ago.

But young, sin­gle peo­ple in metropoli­tan ar­eas who were al­ready sav­ing are sav­ing more com­pared with other age groups.

Against this, how­ever, the Fin­Scope re­search found that an in­creas­ing num­ber of younger peo­ple are sim­ply not sav­ing, be­cause they can­not find jobs.

Old Mu­tual says the peo­ple who had been sav­ing and who are now find­ing it the most dif­fi­cult to save in the re­ces­sion are in the 36-to-39 age group. Th­ese house­holds tend to have high debt as a re­sult of home loans and ve­hi­cle fi­nance, as well as chil­dren to raise and ed­u­cate.

Old Mu­tual says the rea­sons peo­ple are sav­ing less in­clude: a poor un­der­stand­ing of sav­ings prod­ucts; over-in­debt­ed­ness; inflation and in­ter­est rate fluc­tu­a­tions; and steep in­creases in prop­erty prices, cre­at­ing a cul­ture of sav­ing in prop­erty, which in turn has low liq­uid­ity.

Fu­neral as­sur­ance is the num­ber one sav­ings ve­hi­cle for South Africans.

Old Mu­tual says of the peo­ple who save, 61 per­cent will in­clude a fu­neral pol­icy in their fi­nan­cial prod­ucts.

How­ever, fu­neral as­sur­ance cover has dropped from 43 per­cent to 40 per­cent of house­holds over­all, ac­cord­ing to Fin­Scope.

Fin­Scope found that there has been a shift to­wards for­mal, reg­u­lated fu­neral as­sur­ance providers and away from burial so­ci­eties, with banks in par­tic­u­lar in­creas­ing their share of the mar­ket. And there is greater scope for im­prove­ment in this sec­tor of the fi­nan­cial ser­vices mar­ket.

Rob Pow­ell of TNS re­search Sur­veys says that ways have to be found to stream­line the pay­ment of ben­e­fits with for­mal sec­tor prod­ucts.

Most peo­ple who have fu­neral as­sur­ance want to be paid the ben­e­fits im­me­di­ately, whereas they find that their claims are de­layed by com­plex re­quire­ments, par­tic­u­larly for doc­u­ments, Pow­ell says.

The Fin­Scope sur­vey found that the av­er­age amount con­trib­uted by in­di­vid­u­als in­volved in a fu­neral is R2 700, which is higher than the av­er­age monthly in­come of many house­holds.

Old Mu­tual found that, af­ter fu­neral as­sur­ance, among peo­ple who do save the next most used sav­ings ve­hi­cles were pen­sion or prov­i­dent funds, fol­lowed by med­i­cal schemes, risk life as­sur­ance, cash in the bank, re­tire­ment an­nu­ities, stokvels and life as­sur­ance en­dow­ment poli­cies.

House­holds that earn less than R6 000 a month are more likely to use in­for­mal sav­ings ve­hi­cles.

Old Mu­tual found that 43 per­cent of black house­holds that save do so through a stokvel.

Old Mu­tual says that among peo­ple who save, two out of ev­ery five house­holds have a mem­ber of a pen­sion or prov­i­dent fund. Up­per­in­come house­holds are three times more likely to have a mem­ber of a re­tire­ment fund.

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