Consumers struggle to save due to expenses
Lack of financial literacy plays part in inability to budget
A recent survey by DebtSafe revealed that 80% of the respondents struggle to save because they don’t have enough money to cover their living expenses.
This, put together with debt and lack of financial literacy, is contributing to their inability to budget.
DebtSafe says the effects of poor financial literacy can be devastating on your financial future, right through to retirement, where it is estimated that only six out of every 100 individuals will be able to retire comfortably.
Francis*, a father of four who has to take care of his mother and wife, is among people with lack of financial literacy and fails to budget.
With a salary of R31,395, he struggled to make ends meet and like 80% of the respondents, his money is gone within five days of being paid.
“I pay R6,500 on my bond and have stopped driving to work due to the petrol price increase. I pay a R5,100 instalment on my car. Two of my children are still in school and their transport increased by R200 to R1,900 in July. I pay insurance, funeral policies and a R90,000 loan I took to extend our house.
“I’m paying back R4,300 on it and the loan I took was not enough to cover everything I wanted to do. My other child is in university and I have to send her an allowance every month. The other one is unemployed and I was not able to send him to university when he finished matric in 2004.
“Food prices have also gone up, so as soon as all these deductions have gone off, I’m literally left with nothing. There is nothing left to save.”
He said he would love to get to a place where he gets to save between R2,000 and R3,000 a month.
“I am using a lot of money on extending the house. Once that is done, I hope I will be able to budget better,” he says, admitting that he will make it a priority to speak to someone who can teach him financial literacy and how he can do better.
The survey also found that because people “don’t know any better, they turn to payday lenders, personal loans and unscrupulous lenders to get them through the month”.
“Consumers are experiencing dire financial times... With the escalating living costs and bills upon bills, one can understand why saving does not take priority when South Africans are fighting to survive.
“The biggest financial concern consumers currently have is that they cannot save for anything and the main reason is the high cost of living,” says DebtSafe debt adviser Carla Oberholzer.
Head of retirement at employee benefits advisory firm NMG Benefits, Craigh Chidrawi, says one solution to
the problem of low financial literacy lies in app-based financial learning experiences.
“The Smart Alec app, which is part of NMG’s offering teaches users a range of financial principles, from the basics like banking, types of bank accounts, payments and savings to ensure smart budgeting for the next year.
“These apps give their users the knowledge to understand financial matters through easy-to-grasp, story-driven educational content that is delivered to their mobile phones, wherever they are,” Chidwari says.
“Financial literacy affects every aspect of our lives, from
education to where we live and how we access medical care. The less debt we have, the less stressed and heathier we are.
“Even just taking a few minutes every day to educate ourselves better about financial matters is an investment in our futures.
“If you don’t have access to an app through your employer, fear not.
“There are numerous free online resources that will help you start making better financial decisions.
“Good financial literacy is the foundation for a better life for you and your family,”
The survey also found that on saving money, the biggest
financial concern consumers have is:
Not being able to save for anything (27%); Income not keeping up with various expenses (21%); Being the sole provider of the family (21%); and Having “way too much debt” (17%).
Of the 80% that struggled to save, 48% strongly agree they can’t save, and 32% agree.
The main reasons consumers struggle to save are:
Not having money left after paying for their living costs and deductions; Having too many financial responsibilities; and Having too much debt.
‘‘ After deductions, I’m left with nothing
‘‘ People are fighting to fighting to survive
Living costs, including rising food and fuel costs; data/Wi-Fi services and pay-TV were listed as the top-three typical consumer expenses.
Debt reality:
56% of survey participants with debt highlight they are in arrears with their payments. And retail credit is the debt they are primarily behind with; Consumers confirmed their reason for having debt – dealing with tough economic times and servicing costly living expenses; and Lastly, over 60% of respondents confirm they need professional help with their finances.