Take a fresh look at money
Lizl Budhram from Old Mutual Personal Finance said data from the 2018 Old Mutual Savings and Investment Monitor showed that living from pay cheque to pay cheque was an unhealthy cycle that required immediate redress.
“Historically, many households had to make ends meet in a low-income environment that made saving or investing money virtually impossible,” Budhram explained. Compounding the problem has been the fact that many people were denied access to formal financial services.
Budhram said this contributed to a financial culture that normalised spending all monthly earnings.
“We do as we see, and not as we’re told,” she added, pointing to a survey conducted by the National Foundation of Credit Counselling in America, which found that the majority of respondents learnt most of what they know about personal finance from their parents.
“Children pick up money habits from what they see in their homes,” she says. “People who grew up in households where there was responsible financial behaviour are positively influenced and more likely to be responsible with money.”
Although rising prices, high personal debt, insufficient earnings, high unemployment and the need to take care of family members makes getting through the month increasingly challenging, Budhram believed it was still possible to reinvent Africa’s savings culture.
“It is critical, particularly for younger generations, to recognise that they do not need to fall into the financial traps their parents found themselves in. Today, young people have far greater access to economic participation and opportunities, their earning potential is higher and, possibly most importantly, they have greater access to financial education, solutions and services.”
Budhram encourages young professionals to avoid procrastinating when it comes to their finances and to prioritise financial freedom. This may require a mind-shift when it comes to their approach to money.
“The time is now to start a new financial culture: get the right advice, make savings a priority and commit to a clear financial plan that will help you reach your financial goals.”
By doing this, she said, the next generation would contribute to a stronger savings culture in South Africa and start a new tradition of healthy financial habits in their own families.
Budhram added that getting rid of the desire to “keep up with the Khumalos, the Karims and the Kardashians” was also an important step to take. She encourages young people to constantly evaluate their financial situation in three ways:
* Partner with a financial adviser to get guidance on financial decisions for long-term wealth creation.
* Tracking daily spending through the use of clever technology such as budgeting apps (like 22seven).
* Dedicating time to upskilling financial literacy levels through online education courses.
“To change our money habits, we need to stop, reflect and make rational decisions.
Supplied/ PERSONAL FINANCE