Many years ago, British humourist and former Punch editor Alan Coren came up with this advice: “Enjoy your life today because yesterday (has) gone and tomorrow may never come.”
Whereas his sentiments were admirable, essentially acknowledging our need to lighten up and get a life, the awful truth is that tomorrow always comes, bringing with it all manner of financial and other reality checks. Some of these – such as political turmoil, macro-economics, personal challenges and sheer bad luck – may not be our fault, but citing them as an excuse for one’s beleaguered bank account isn’t going to help much.
So, are young people embracing the Coren mantra, tossing aside fiscal responsibility in pursuit of instant gratification and fun, fun, fun? Well, yes and no. Barring those with the advantage of trust funds and the like, post-Millennials (aka “Generation Z” or, in local parlance, “Afrillennials”) are doing reasonably well at balancing fun with common sense – but should be doing more, and probably need to depend less on the folks.
The term “Afrillennials” was coined by the organisation Student Village, a highly successful portal into the world of students, with access to 40-plus campuses and over one million young people across the country. Spokesperson Samantha van Zyl says the reality is that students will save money for their next big purchase, but, on average, will put away only R326 a month, equating to about 17 percent of their income. “Students are also now doing everything it takes to make more money so that they can keep up with the lifestyle they try to create.”
Not surprisingly, the survey found that different ethnicities and genders exhibited different spending patterns. The organisation’s Student Spend Report for 2017 – basically, a barometer of students’ financial needs – indicates that an encouraging 61 percent want to learn about budgeting and 54 percent would like to know more about saving. Says Van Zyl: “We can see a raised level of conscious efforts to work better with their money, but students still spend more than the average South African.”
Specifically, they spend an average of R2 714 a month, or R32 568 a year, against a spend of R32 215 for the average South African. The population of 985 212 tertiary students coughed up a total of R32 billion during 2017.
Here’s where it gets interesting: according to the survey, parents and other family members provided a whopping 85 percent of this money, with 29 percent sourced from full- or part-time work and another 24 percent from bursaries or sponsors. If these percentages seem a little confusing, it’s because some questions in the survey allowed students to select more than one choice, after which the responses were consolidated. As Van Zyl explains it: “Someone receiving money from mom and dad may also have a job on the side in case one income stream runs dry in the moment of need.”
Do young people need a reality check when it comes to “sweating the small stuff”, and understand how quickly the cost of seemingly minor indulgences can build up? For example, do they realise that a night out with friends at the local pub, that daily latte at their favourite coffee shop, monthly subscriptions to music services, long conversations on their mobiles, and the like could equate to half-a-month’s rental on a shared flat, or perhaps a car instalment?
In some cases, the answer is a reassuring yes; in others, a resounding no. According to Van Zyl, the annual Student Spend Report has been a valuable reference for students who have requested this information. She adds: “It’s a great eye-opener to know what your peers are spending. We have incorporated the research into our work with brands that need to connect with students – especially banks – to make sure that students are not just made aware of their spending habits, but also to ensure that new students are getting the best head start.”
Evidence suggests that looking good is a critical element of young people’s lifestyle – again, hardly surprising. Women spend on average about one-sixth of their monthly budget (R428) on clothing and footwear, with toiletries, cosmetics and hair treatments sucking up a further R193. Men spend slightly more on shoes and clothes but considerably less (R73) on personal grooming. Alcohol accounts for R261 (men) and R211 (women).
Student Village’s research also revealed that students believe debt can help them “to buy” their way to a good credit rating. Says Van Zyl: “A whopping 29 percent of the students we surveyed own credit cards and 57 percent have retail cards. Students are generally advised to avoid debt, but, due to the affordability challenges they face, with studies being a highlight, they do what it takes to get by and make life happen.”
Francois Viviers, the executive of marketing and communication at Capitec Bank, says young people – he cites students on the cusp of financial independence and those about to start a career – need to build a savings culture from the very outset, noting that South Africans have a reputation as “the worst savers in the world”. He reckons Capitec’s Global One account, which allows clients to link up to four savings plans to their main account and easily move money between them is a good place to start.
His best advice:
Save, save, save … even if it’s just a little every month, this will go a long way towards ensuring a better future;
Have a money plan, set financial goals, and be disciplined;
Only use credit if it’s really needed;
Keep track of the small spending; it adds up; and
Work towards a clear goal.
Wayne Ramgath, who heads the youth and inclusive banking division at Standard Bank, says they have invested heavily in initiatives that go a lot further than bank account options. “We develop young entrepreneurs by creating platforms to equip them with the necessary skills to start up and succeed with their business ventures.”
This is offered through classroom training (so-called Bootcamps) where entrepreneurs are taught how to set up a business and create their own business model. Another useful strategy is information-sharing sessions where the bank invites inspirational entrepreneurs to share their experiences with young people.
Ramgath also cites the bank’s partnership with Siyavula, an online maths and science platform that bolsters classroom instruction, and the Feenix crowd-funding platform, aimed at people seeking a reliable channel for student funding contributions.
It’s apparent from their research that students who receive pocket money generally have enough for what they deem as “essential” and very little left over for savings, says Ramgath.
He elaborates: “Keeping up in social settings is typical of most youth, and, although luxuries are costly and attending events can be expensive, it is a cost that young people are willing to pay to remain socially relevant.”
His advice to young people kicks off with the budgeting imperative, and specifically the so-called 50/30/20 rule, a popular guideline for breaking down a budget. In essence, it allocates 50 percent of income to necessities for survival such as food, accommodation and medical care. Twenty percent should go towards financial goals, such as paying off debt or saving for retirement, and the remaining 30 percent should be allocated to “wants” such as dining or entertainment.
His top tip: “Don’t let emotions control your money.”
Andrew Bradley of Fiscal Private Client Services says young people should view financial planning in terms of trade-offs. He explains: “The foundation of any financial plan is to understand where and how you spend your money. If you don’t do this, things can very quickly spiral out of control, with dangerous consequences.”
How about the need to “sweat the small stuff”? Bradley believes this is integral to the trade-off mindset. “For some of us, the coffee and music, and what goes with this from a social perspective, is more important than a fancy car. You need to make an informed choice. Understand what makes you happy and fulfilled, then work out how to achieve that in a sustainable way.”
Bradley admits to mild paranoia when it comes to his own financial security. “As a young man, seeing my parents lose most of what they had in a ‘retirement venture’ made me realise that building financial security for me and my family was critical.” But there was a downside to his caution, he adds, because his focus on the future as a destination meant that for a long time he “lost out on the journey”. The solution, which he discovered in time to fix it, was to achieve financial security “without losing out on life”.