We’re cop­ing bet­ter, but not sav­ing more

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

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.


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.

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