In today’s world, knowledge is the key to financial success.
So, while a recent study by Nedbank revealed that South Africa's youth are showing a commendable improvement in their commitment to saving, there is a pressing need for improved financial information and transparent guidance to help them achieve the outcomes they desire.
That’s according to Vanesha Palani, Executive of Financial Management at Nedbank who says that the research findings point to the fact that young adults are eager to explore new savings products and methods, but that they are also seeking transparent and unbiased guidance to help them make informed savings and investment decisions.
“Our research indicates that 68% of young adults are now saving on a monthly basis, with an additional 7% saving weekly,” Palani says, “however a full 78% of survey participants expressed a desire for more comprehensive knowledge on ways to grow their money.”
According to Palani, the guidance specifically mentioned by respondents covers a vast array of requirements, but the highest number of young savers want transparent information on returns and costs, personalised advice and detailed insights into different savings products and their functionalities.
Palani underscores the urgency of meeting these informational needs, in order to not only support young adults on their savings journeys, but also to entrench savings habits in young people in order to improve on the savings culture of previous generations.
“If our young adults are actively seeking more information and transparency to make the right savings decisions, we have a responsibility to provide that to them,’ she explains, ‘so that our country can finally begin to build the savings culture that has been missing from SA society for so long.”
The research findings that show the vast majority of young adults in South Africa who are saving are doing so in a formalised way, with savings accounts being the preferred choice for 90% of them.
That said, there is still a healthy appreciation amongst the youth of the value of informal savings methods, with 89% of respondents making use of some form if informal savings vehicle, ranging from accumulating grocery vouchers or stamps for end-of-year expenses, to participating in stokvels to save towards a specific goal, storing cash at home, or holding money in a transactional bank account.
Palani says that, while many of the young people who participated in the Nedbank survey demonstrate a surprisingly conservative approach to saving and investment, many also display more of a sense of adventure than is often seen in older generations of savers.
“Around 75% of respondents prefer direct investments over safer options like unit trusts,’ she points out, and other popular investment avenues include cryptocurrencies, assets for resale, rental property, and independent share and forex trading making up the remainder.”
However, while the savings focus of the youth is heartening, Palani says that the need for guidance becomes patently obvious when one digs deeper into the reasons most young South Africans give for saving.
“Short-term savings goals predominate among young adults,’ she says, ‘and there appears to be very little focus on retirement planning or investment, despite increasing life expectancies demanding that young people begin their retirement savings journeys as early in their lives as possible.”
There are also several key barriers to entry identified by many participants in the research, including perceived low interest rates offered by formal savings accounts, insufficient information about available products, and high costs.
The research also reveals that factors like rewards points for saving, personalised saving and investment advice, banking fee discounts, and goal-oriented apps and tools influence the saving behaviours of young people and inform their choice of products and service providers.
Digital channels are very popular enablers of saving and investment among young adults, with 51% utilising apps and 16% using electronic banking as their primary means of saving.
“By empowering young adults with accessible savings options, transparent information, and personalised advice, Nedbank is helping to nurture a financially informed SA youth," she says, ”and nurturing the new generation of savers that are equipped to make sound long-term financial decisions that benefit them and the South African economy.“