ABOUT THE SUR­VEY

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

The Old Mu­tual Sav­ings & In­vest­ment Mon­i­tor is a bian­nual study of sav­ings trends in South Africa. The sur­vey, which is in its eighth year, tracks and eval­u­ates the fi­nan­cial habits and at­ti­tudes of work­ing peo­ple in 1 000 ur­ban house­holds in the fol­low­ing monthly in­come brack­ets: less than R6 000; R6 000 to R13 999; R14 000 to R19 999; R20 000 to R39 999; and more than R40 000. im­prove in the next six months. Th­ese pos­i­tive sen­ti­ments can, in part, be at­trib­uted to the fact that all the re­spon­dents are work­ing peo­ple, Ni­chol­son says.

Nev­er­the­less, they are feel­ing the pinch. And to cope with the pres­sure on their fi­nances, mid­dle- and low­er­in­come house­holds are hav­ing to do more “in­ten­sive” bud­get­ing and plan­ning, while higher- in­come house­holds are cut­ting back on lux­u­ries, the sur­vey shows.

A re­spon­dent whose house­hold in­come is less than R6 000 a month told the re­searchers: “We made our chil­dren walk to school in­stead of tak­ing a taxi.”

An­other said: “My wife got put on short time and we had to down­scale. We now think twice be­fore go­ing into debt, be­cause we can’t make the re­quired re­pay­ments.”

Peo­ple with a house­hold in­come of be­tween R20 000 and R39 999 a month are also tight­en­ing their belts. “We cut down on an­nual hol­i­days. If I get a bonus at work, I’ll pay ex­tra into my bond,” one re­spon­dent in this in­come cat­e­gory said. “I’m sav­ing for a car so that I can start a busi­ness and earn ex­tra in­come,” said an­other.

A wor­ry­ing trend is that fewer con­sumers are sav­ing for their chil­dren’s ed­u­ca­tion. Last year, 50 per­cent of re­spon­dents said they were sav­ing for their chil­dren’s ed­u­ca­tion, com­pared with 40 per­cent of re­spon­dents this year. In 2010, 55 per­cent of re­spon­dents were sav­ing for their chil­dren’s ed­u­ca­tion.

“The de­cline in sav­ing for ed­u­ca­tion is wor­ry­ing. We don’t know why this is hap­pen­ing, but we can as­sume peo­ple are more strapped for money. Al­though ed­u­ca­tion is a pri­or­ity for many peo­ple, they have more press­ing ex­penses, such as food and trans­port,” Ni­chol­son says.

The sur­vey shows that, as in­come in­creases, so does the in­cli­na­tion to save for re­tire­ment and a rainy day.

Re­spon­dents in house­holds with an in­come of more than R40 000 a month pri­ori­tise sav­ing for re­tire­ment and emer­gen­cies. Peo­ple with a house­hold in­come of be­tween R14 000 and R19 999 place a higher value on sav­ing for ed­u­ca­tion. And those in house­holds with an in­come of less than R6 000 a month are more in­clined to save for fu­neral ex­penses and home im­prove­ments.

This year’s sur­vey shows that more peo­ple are sav­ing for fu­neral ex­penses and to pay off debt than was the case last year.

“Pay­ing off debt is an in­ter­est­ing one. Last year, 17 per­cent of re­spon­dents were sav­ing to pay off debt, com­pared with 26 per­cent this year. There seems to be a re­al­i­sa­tion that peo­ple need to get rid of the noose around their necks,” Ni­chol­son says.

FI­NAN­CIAL GOALS

When asked what their fi­nan­cial goals are for the next five years, 23 per­cent of re­spon­dents said they want to buy a prop­erty, while 23 per­cent plan to in­vest in their own busi­ness. For 16 per­cent of re­spon­dents, the goal is to pro­vide for their chil­dren’s ed­u­ca­tion; 15 per­cent aim to buy a car; and 14 per­cent plan to go on a hol­i­day in the next five years.

Ni­chol­son says what is note­wor­thy about the grow­ing num­ber of peo­ple who say they are sav­ing to start their own busi­ness is that they are not look­ing to leave their jobs; in­stead, they want their own busi­ness as a side­line. “This in­di­cates that they’re look­ing to be more in con­trol of their fu­ture,” she says.

The goal to own prop­erty sug­gests that peo­ple see prop­erty own­er­ship as a means of cre­at­ing wealth and as a forced sav­ing, she says.

SAV­INGS PROD­UCTS

The two most pop­u­lar sav­ings or in­vest­ment ve­hi­cles used by South Africans are fu­neral poli­cies and in­for­mal sav­ings ve­hi­cles (65 per­cent), such as stokvels, burial so­ci­eties and gro­cery schemes: 65 per­cent of re­spon­dents have a fu­neral pol­icy, com­pared with 66 per­cent last year.

( A gro­cery scheme is where mem­bers make a con­tri­bu­tion ev­ery month and the scheme buys in bulk from a whole­saler, on be­half of the mem­bers, and the gro­ceries are shared. Mem­bers ben­e­fit from the economies of scale and by sav­ing on trans­port costs.)

Ni­chol­son says the pref­er­ence for in­for­mal sav­ings ve­hi­cles does not nec­es­sar­ily im­ply a lack of faith in for­mal fi­nan­cial in­sti­tu­tions.

“A stokvel may be more at­trac­tive be­cause of the easy ac­cess to your money, no costs and not hav­ing to fill out forms, in ad­di­tion to the fact that it’s so­cial and you may know and trust the peo­ple who run the scheme,” she says.

Peo­ple in lower-in­come groups spend their stokvel sav­ings mainly on pri­mary ed­u­ca­tion and gro­ceries, Ni­chol­son says. “The up­per-in­come groups are more likely to spend stokvel money on ter­tiary ed­u­ca­tion costs and hol­i­days.”

The next most com­mon sav­ings ve­hi­cle is a pen­sion or prov­i­dent fund ( 56 per­cent of re­spon­dents be­long to a pen­sion or prov­i­dent fund), fol­lowed by banked cash sav­ings prod­ucts (40 per­cent).

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