Old Mutual Savings and Investment Monitor – Painting a brim picture of South Africans’ money matters

“Tracking trends provides valuable insights into the current and future financial services needs of our customers.” This is one of the objectives of the Old Mutual Savings & Investment Monitor, an annual study that is released to support the national drive to strengthen South Africa’s savings culture.

The inaugural measure was taken in 2009 and this July 2019 measure is the 14th measure to date. Each wave comprises of 1 000 interviews amongst working South Africans living in major metropolitan areas and examines levels of savings and investment as well as their attitude to finances in general and savings in particular.

The report states that the results should be viewed against the following:

  • A weakening economic backdrop;
  • South Africa’s unemployment rate increased to 27.6 percent in the first quarter of 2019 and news of large scale retrenchments abound with more to come;
  • Political changes;
  • Negative public sentiment towards corruption, maladministration and sheer wastage of public funds continues to run high;
  • Significant rise in trade tensions; and
  • The effects of climate change continue to be felt at home and abroad.

Perceptions of current financial position and managing financial stress

The respondents’ satisfaction with their current financial situation is down marginally, but still better than the low recorded in 2016. Satisfaction levels also remain strongly correlated to income. In the 2014 measure a question was added to better understand in essence how South Africans feel in terms of how they are managing to get by. The question employs a 5 point scale ranging from “living comfortably” to “finding it very difficult”. At a total level the situation is largely unchanged from 2018:

  • 29% of the respondents shared that they are “doing all right”
  • 35% are “just about getting by”
  • 20% are “finding it quite difficult” and
  • 9% are “finding it very difficult”

As before, it is lower income households who are struggling the most.

At the launch of this year’s results Lynette Nicholson, research manager at Old Mutual commented that there should be no surprise that they noted a significant increase in the number of households experiencing financial stress. “This year’s survey shows an average 25% increase in households suffering major stress due to money issues”, Nicholson confirmed.

She further stated that the most disturbing trend this year is that saving for emergencies, at 30%, is the lowest since Old Mutual started publishing the report 10 years ago as it is down from 43% last year.

Other important insights

  • Fewer than half of the respondents contribute to a pension or provident fund, and only one in four contribute to a retirement annuity. A staggering 42% make no contribution to formal retirement savings.
  • Another sign of the detrimental impact to saving on cash-strapped households is the decline in saving for education. This year’s study shows that only 45% of parents are doing so, down significantly from 63% in 2010.
  • Views on long term saving reflected that 33% of respondents indicated that saving for the future is not a priority for them right now. This is up from 22% only a year ago.
  • There is still a fairly heavy reliance on personal loans in most households. The report shows that personal loans from financial institutions has climbed from 14% last year to 19%, with the highest incidence, at 25%, amongst Generation X consumers (born between 1965 and 1979).
  • Loans from family or friends have grown quite sharply, while the irregularity of repayment of these loans has increased from 35% last year to 41% this year.
  • 39% of respondents said that they have fallen behind on store card payments, which is compounded by the 27% of people who have fallen behind on household bills.

“We are committed to encouraging all South Africans to take an active interest in understanding their household finances, particularly with regard to saving for their future needs. Speaking to a financial adviser makes sense on so many levels, no matter your current financial circumstances or priorities. Even the most modest contribution to a long-term savings plan can make a considerable difference to one’s financial future,” Nicholson concluded.

The answer therefore lies in financial education and sound professional financial advice.

Click here to download the OM Savings & Investment Monitor for detailed insights.

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