Despite the financial pressures on urban working South Africans, they are showing slightly more confidence in their ability to manage their money, and their financial stress levels are slightly lower than last year, according to an annual survey by Old Mutual.
The 2017 Old Mutual Savings and Investment Monitor, released this week, shows a rise in people’s rating of their confidence to make financial decisions. The average rating was 6.5 out of 10 (with 10 being fully confident and 0 being a total lack of confidence), up from a record low of 6.2 last year. This is off a high of 7.6 back in 2010.
The annual monitor is a survey of 1 000 working people in South Africa’s major metropolitan areas. It examines levels of savings and investment, as well as people’s attitudes to their finances in general. Respondents were questioned about household income rather than personal income. Field work was undertaken from April 25 to May 24.
The monitor also shows a decline in people taking out personal loans. Fourteen percent of respondents in the survey said they had taken out a personal loan from a financial institution, as against 21% last year, and 6% had taken a loan from a micro-lender (8% last year). Respondents saying they had loaned money from friends or family members had also dropped, to 13% from 15% last year.
Lynette Nicholson, the research manager at Old Mutual, says: “There is a very likely link between some of the debt and loan-related findings in our research and the encouraging decrease in income-to-debt ratio recently reported by the South African Reserve Bank.”
Nicholson believes this shift in behaviour reflects South Africans’ growing awareness of the serious implications of debt, and a better understanding of the importance of reducing debt. However, because of the strained economic conditions, South Africans are finding it increasingly difficult to save for their futures, she says.
The findings, unfortunately, also point to South Africans digging into their reserves, with 54% of respondents (up from 50% last year) saying they would dip into savings for an unexpected expense of R1 000.
Home loan repayment patterns have also changed, with a decrease in the proportion of homeowners able to pay extra into their bonds.
One area of concern highlighted by the monitor is that only 44% of South Africa’s working metropolitan parents are saving for their children’s education (down from 46% last year). This is most dire among low-income earners (with net household income of less than R6 000 a month) – only 29% say they are saving for their children’s education.
When it comes to saving for retirement, an alarming 40% of respondents said they have no form of formal retirement savings at all, including pension/provident funds or retirement annuities. Many said they would rely on government (33% of the total) and/or their children (37%) to support them in retirement.
Findings about the sandwich generation – those that are looking after their own financial needs as well as those of their parents and their children – show that the incidence remains steady at 28% of working urban households.
“But there are signs that this phenomenon will grow,” Nicholson says, “especially as nearly half (49%) of 18-to-34-year-olds still live at home with their parents, which is up from last year’s 42%.”
An area of continued interest is the informal saving sector, and stokvels in particular. Reportedly worth R49 billion, stokvels remain one of the most popular savings vehicles, together with funeral policies, with just over 70% of the population using them.
Nicholson says that economic pressures led to about 39% of respondents considering opening their own businesses.
“However, our research shows that the number of fully self-employed entrepreneurs has dropped from 12% to 8%,” she says (see “Slashers working day and night to supplement their income”, above).
“The one resounding message that emerges from our research each year is that we are not saving enough: as individuals and as a nation. The reality is that we all need to accept that we must reduce our spending today to make provision for tomorrow. Yes, there are small signs of improvement, but as individuals we need to urgently take more drastic steps if we are to have any hope of building a financially secure future,” Nicholson says.
• 84% of those questioned had at least a matric qualification.
• 50% of mothers questioned considered themselves single mothers. Of the single mothers, 16% said the fathers of their children made regular financial contributions to support the family, 36% said the fathers made occasional contributions, and 48% said the fathers did not support them financially.
• 93% worked full time, 7% worked part time.
• 92% worked for an employer, 8% were self-employed.
• Of the 8% of respondents who are self-employed, 40% earn more than R40 000 a month.
• The average household allocates 15% of its income to savings and spends 7% on insurance and medical scheme cover, 16% on servicing debt and 62% on consumables and living expenses.
GRAPHS: OLD MUTUAL SAVINGS AND INVESTMENT MONITOR 2017