ABOUT THE SURVEY

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).