8.8-million single mothers at risk of turning to unsecured credit
The merry-go-round of money is something every South African understands. Whether you’re a high-end earner living in Joburg’s Northern Suburbs or a middle-class South African making do on an average salary for a respectable job, money always matters. And if you’re a woman, this is especially true. Expected to take care of the children, as well as other family members, while stocking up the pantry and buying school uniforms, it’s not surprising then that a TymeBank 2019 survey revealed that 59% of women run out of money before the end of the month. And if you’re a Black women, this is even higher at 64%.
Further adding to women’s woes, according to Eighty20’s Credit Bureau Data:
- Of the 19 million credit-active consumers, 57% are female, however, women hold 42% of the debt by value
- 31% of credit-active women are in arrears vs 30% for men
- 58% of loans in arrears are held by women, while 57% of loans that are in good standing are held by women.
“Add to this the ravages of the Coronavirus pandemic - which has seen thousands of women lose their jobs or have their salaries cut – and it’s clear that South African women have a financial problem that is gaining momentum,” comments Neil Roets from Debt Rescue.
Even though women have adopted money conscious behaviours, and cut down where they can on day-to-day expenses, living in ‘survival mode’ is a harsh reality facing millions of women in our country, and is something that a recent Sanlam survey uncovered.
Among car repayments, bonds or rent, electricity, rates and taxes, cell phones and data, etc. the list of everyday expenses just gets higher – which leads to a higher risk of taking on (more) debt to finance these expenses.
“While both men and women are taking on more debt repayments than before the pandemic hit, PayProp suggests that women spend 44% of their income on debt, leaving them with 23% as disposable income. That is almost half of their earnings on debt! With the price of goods rising thanks to increased fuel prices and a rise in fuel price levies, life is just not getting any easier,” says Roets.
Increase in applications, but more being turned down
As a consequence, more people are turning to credit to help them just get through the month. Of the 25-million active credit consumers in South Africa, 10-million are behind on their payments, and in 2019, of the one million new credit applications made, 55,4% were turned down.
“This is important as being turned down for credit highlights how little money people have as they are unable to even repay their creditors for vital financial support,” said Roets.
Single is more serious
But it’s the 8.8-million (Eithy20) single mothers who are really being hit the hardest – and are also the most likely to turn to unsecured credit for personal loans, payday loans and credit card debt. This is because 60% of households are fatherless, meaning all financial responsibilities fall onto the mother. Despite this burden, what is interesting, and encouraging, is that women are also the best budgeters. According to TymeBank, 80% of women aged between 25 and 45 budget, versus the country budget of 37%. This could be because with so many mouths to feed, money needs to go that much further.
Eating the elephant bite by bite
Managing money, especially when there is not a lot of it, is tough. But there are things that you can do to help you through these difficult times. Here Roets unpacks the most important:
Get educated: Make sure you understand more about money and become financially literate. Research suggests that women are less comfortable making retirement investment decisions. Staggeringly, a 2018 Federal Reserve study found that just 32% of women with a bachelor’s degree are comfortable managing their own investments. Overcome this by reading books and articles and contacting your financial advisor. Or even search on social media for relevant groups to join.
Set financial goals: This is a great starting point and once you put some steps in place it helps you move towards your goals. Make sure you have short- and long-term goals where you can celebrate small wins and large ones such as building your child’s education fund.
Build a budget: Gather all your bills and invoices and write them down in a book so you can physically see all your monthly income and expenses. Sub-set them into needs e.g. “housing and food” or wants like “streaming services and eating out”. Now, minus your expenses from your income; if there is nothing left to even save, you need to find ways to cut back on expenses or increase your income.
Be ready for any emergency: A rainy day fund is a key part of any financial plan, as much as many of us don’t like to create one. It can protect you at times when you have an accident, lose a job or have a medical crisis. Try to save three to six months’ worth of living expenses and each time you’re paid put some money, even a small bit, away towards this fund. It will also give you a sense of accomplishment.
Avoid bad debt: Some debt like that for a house or study loan can be seen as assets and are ‘good debt’. ‘Bad debt’ are credit cards, stores cards and unsecured loans. While they look affordable, you will pay many times over in interest so avoid this route wherever practically possible.
“Above all, believe in yourself. Money doesn’t make the world go around. It certainly helps, but keeping a positive attitude and trying to find smart ways to save go a long way in helping your mental state of mind too, which is far more important than what is in your bank account,” concludes Roets.