We’re coping better, but not saving more
Many South Africans are finding ways to cope better with the squeeze on their finances, but they haven’t yet found ways to save more. This is one of the key findings of the Old Mutual Savings & Investment Monitor, which was released this week.
The survey shows that, over the past three years, South Africans have moved from “a state of panic” in 2011, to “paying attention” last year, to “recalibrating their finances” this year.
Although this trend is positive, it’s a change born of necessity, Lynette Nicholson, head of research at Old Mutual, says.
“People are feeling better about their finances, because they’ve managed to rejig their finances, control their expenditure and lower their expectations, but, unfortunately, it’s not translating into increased saving,” Nicholson says.
Consumers have developed coping skills, instead of becoming more financially literate or astute. “For example, they may have let go of their gardener, or joined a lift club or moved their children out of a private school,” she says.
In addition to feeling better about their finances, respondents are also feeling more confident about making financial decisions and are more satisfied with their financial situation than they were last year. Half of all respondents feel they are in a better financial situation compared with a year ago, and 37 percent expect their financial situation to South African youth are an optimistic bunch – at least those who are employed: 57 percent believe their financial situation will improve in the next six months and 47 percent claim to be saving more than they were a year ago.
This is according to the Old Mutual Savings & Investment Monitor, which this year focused on how the country’s youth are managing their finances.
For the purposes of the survey, “youth” are defined as working metropolitan people between the ages of 18 and 30. Half of the survey respondents live in Gauteng; 88 percent have access to the internet; 49 percent still live at home with their parents; 30 percent are married or living with a partner; 55 percent of those who are mothers consider themselves “single moms”; 20 percent work in the public sector; 15 percent do not have matric; 13 percent own property; and six percent are self-employed.
Upbeat as the youth may be, like the rest of us, they’re feeling the pinch: 68 percent say they are having to cut down on expenses versus 55 percent last year, and in the previous year, only 36 percent of respondents said they were cutting down on expenses.
A respondent with a household income of less than R6 000 a month told the researchers: “I keep away from my friends who are going to movies and braais.”
Another respondent said: “I sometimes walk to work instead of catching a taxi.”
A respondent whose monthly household income falls within the R6 000-to-R13 999 bracket said: “My lifestyle has changed: staying at home more often now. I don’t go to clubs and movies as often as I used to.”
What are the savings priorities of young people? Respondents said they were saving for a car (34 percent), to pay for their children’s education (33 percent), emergencies (31 percent), a deposit on a home (28 percent), retirement (26 percent), to pay off debt (26 percent), funeral expenses (25 percent) and to start a business (12 percent).
There have been some notable changes in savings priorities, according to this year’s survey. Last year, 51 percent of young respondents said they were saving for their children’s education, compared with 33 percent this year. Many more are saving to pay off debt: 26 percent this year versus 16 percent last year. And twice as many are now saving to start their own business.
When asked about their financial goals for the next five years, 28 percent said “start my own business”; 25 percent wanted to buy property and 20 percent planned to buy a car.
The youth are predominantly using informal savings vehicles (such as stokvels) to save: 63 percent say they use such savings vehicles. On the other hand, 50 percent say they have a pension or provident fund, 50 percent have a funeral policy, and 41 percent have banked cash savings. Only 24 percent have invested in a life assurance product and only 13 percent have a retirement annuity (RA).
As many as 45 percent of youth have neither an RA, nor are they members of a pension or provident fund.
The increase in the use of informal savings vehicles among black youth has been significant and consistent over the years.
In 2010, 47 percent of black youth said they used informal savings instruments to save. In 2011, 48 percent did. Last year, the figure jumped to 61 percent, and this year it continued to climb.
THE YOUTH AND DEBT
According to the survey, eight percent of the youth have taken a personal loan from a relative or friend this year; 14 percent have taken a personal loan from a financial institution; 59 percent have at least one store card; and 19 percent have at least one credit card.
When it comes to seeking financial advice, 23 percent say they regularly consult a bank consultant, but only 12 percent say they regularly consult a financial adviser. Half say they have never seen a financial adviser, while 18 percent of youth say they would consider buying a financial product online.
South Africans have found ways to live within their means, but most of us are still not saving enough. Angelique Ardé reports on the findings of the latest Old Mutual Savings & Investment Monitor.