Most South Africans are not saving at all
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.