Households continue to tighten their belts

SA consumers are feeling the pinch as the sluggish economy and rising prices erode their ability to squirrel away enough for their retirement or a rainy day.

The 2019 Old Mutual Savings & Investment Monitor survey, released yesterday, shows an average 25% increase in households suffering major stress due to money issues.

Lower income households are under the most pressure, but middle- to upper-income families are showing higher levels of financial stress too.

Only 7% of respondents say they’re living comfortably; 29% say they’re “doing all right”; nearly a third feel they’re just getting by, while 29% are “finding it difficult”.

Probably the most disturbing trend this year is that saving for emergencies, at 30% (2018: 43%), is the lowest since the report was first published 10 years ago.

Fewer than half of the respondents contribute to a pension or provident fund, and only one in four contribute to a retirement annuity; 42% make no contribution to formal retirement savings.

Another sign of the detrimental impact to saving on cash-strapped households is the decline in saving for education: only 45% of parents are doing so (2010: 63%).

Thirty-three percent of respondents said saving for the future isn’t a priority right now (2018: 22%).

Personal loans from financial institutions have climbed from 14% last year to 19%, with the highest incidence, at 25%, amongst Generation X consumers (born between 1965-1979).

Borrowing from family and friends rose from 10% to 17%, with 18- to 30-year-olds the primary culprits.

These attitudes are reflected to a certain extent in many households’ borrowing and repayment behaviours. Probably the most concerning insight is that loans from family or friends have grown quite sharply, while the irregularity of repayment of these loans has increased from 35% last year to 41% this year.

Some 70% of black households contribute to some sort of informal savings scheme. Stokvels dominate this market with 59% of black households contributing to at least one stokvel every month. The borrowing function from stokvels appears to be growing in prominence, with 38% of respondents who are a member of one borrowing from their scheme this year.

Further evidence of the pressure on household budgets comes from the 39% of respondents saying they’ve fallen behind on store card payments.

Lynette Nicholson is research manager at Old Mutual