Why do more South Africans feel better about their financial prospects?

According to a graph in this year’s Old Mutual Savings & Investment Monitor (OMSIM), 72% of respondents expect their financial prospects to improve over the next six months, whereas only 5% believe they will get worse.

Old Mutual commented: “These results speak to the resilience of South Africans with a pervading optimism that things will improve.”

This may be true. However, data collection for the main survey (sample size: 1 505 working South Africans) took place from 24 April to 13 May, which was before stage 6 loadshedding brought home the reality of Eskom’s dire situation and what that portends for the economy. One can speculate whether conducting the survey in June or July would have yielded a different result.

And, in the wake of last week’s 75-basis point repo rate increase – and more rate increases are likely – would only a minority (5%) say their financial prospects are likely to get worse or stay the same (23%)?

Strikingly, despite the optimism about their personal finances, only 33% of respondents said they “feel confident” about South Africa’s economy. This is lower than in 2020 and 2021 (34% in both years).

So, why the upbeat mood when it comes to their personal finances?

1. More people’s earnings have recovered or improved

Respondents report they are earning the same as what they did before the pandemic (45%), or they are earning more (20%). That’s a three-percentage point increase from the 65% of respondents who last year were either on par or doing better than before the pandemic.

Nevertheless, 25% said they were still earning “a bit less”, or “significantly less” (9%), than before Covid-19.

Younger respondents (18 to 29 years) have been the main beneficiaries of higher earnings, whereas salary cuts have been more prevalent among those aged 50 to 65.

Respondents in the survey’s highest income band (R60 000 to R99 999 a month) are most likely to be earning more (27% responding in the affirmative), whereas those in the lowest income band (R8 000 to R14 999) are least likely to be earning more (18% answering “yes” to this question).

2. More people feel better about their finances

More respondents feel they are on top of their finances, with 42% saying they have low levels of stress about their finances, up from 37% in 2021. Only 8% said they have no financial worries, which is in line with the figure for the past two surveys.

The percentage of respondents who feel highly stressed about their finances declined from 42% last year to 36% this year – coming into line with the 33% figure reported in 2019.

However, the percentage of respondents who feel overwhelmingly stressed remains at 14%, as it was in 2020 and 2019.

Interestingly, respondents in the lowest income band (R8 000 to R14 999) were not the most stressed. High (41%) or overwhelming levels (17%) of stress were most prevalent among those earning R25 000 to R39 999 a month.

The R15 000-to-R24 999 band had the biggest number of respondents with no stress (11%). People whose earnings fell into this band were also likely to have low financial stress (45%), which was also the case for those earning R40 000 to R59 999 a month.

3. More people have built a safety net

Respondents were asked, “If you were retrenched or lost your job, would you have enough money saved to last you one month or less, two months, three months, or more than three months?” This year, 39% said they have enough to last for more than three months, which is up from 36% last year and 27% in 2020. It’s even higher than the figure for 2019: 38%.

There’s also been an improvement in those who say they can hold out for at least three months: 18% this year, compared with 16% last year and 17% in the two years before that.

4. Fewer people are in the sandwich generation

The results show a reduction in the number of respondents who are part of the sandwich generation (supporting children and parents and/or other older dependents). The percentage fell from 43% last year to 39% this year, which is in line with the pre-pandemic percentage of 37%.

“Sandwiching” is more prevalent among those aged 30 to 49 (42%) than those aged 50 to 65 (35%).

People in the two lowest income bands are being squeezed the most by sandwiching, at 43% (R8 000 to R14 999) and 42% (R15 000 to R24 999).

Those earning between R40 000 and R59 000 have the lowest level of dual dependency (26%).

The abatement in being financially squeezed between two generations seems to be due to the reduction in the number of respondents who reported they were supporting an adult, because child dependency, on the other hand, has increased.

This year, 47% said they have an adult who is financially dependent on them. This is down on the 52% in 2020, but it is still above the trend line between 2015 and 2019, when the percentage increased from 35% to 43%.

Adult dependency is highest (51%) among those in the survey’s lowest income backet and those aged between 18 and 49 (48%). But adult dependency is still fairly high – between 45% and 48% – in the other income brackets, with the exception of those earning between R40 000 and R59 999, where it is 33%.

On the other hand, the trend of increasing child dependency continued this year, reaching 78%, compared to 67% in 2018 and 25% in 2015.

Not surprising, child dependency was highest among those aged 30 to 49 (84%). But child dependency was actually much higher among respondents aged 50 to 65, at 71%, than it was among respondents aged 18 to 29 (59%).

5. Fewer people are borrowing money

The survey also shows that although many respondents had to dip into their savings and investments or take out loans to make ends meet over the past year, there has been an improvement in these metrics:

  • 66% made use of points or rewards accumulated on loyalty programmes, down from 69% last year (but higher than 54% in 2020);
  • 52% dipped into their savings, down from 54% in 2021 (but higher than 23% in 2019);
  • 32% cashed in a savings or an investment policy, down from 31% in 2021 (but higher than 23% in 2020);
  • 27% took out a personal loan, down from 28% in 2021 (but higher than 16% in 2020);
  • 40% borrowed money from friends or family, down from 44% last year (but higher than 39% in 2020 and 38% in 2019);
  • 11% took out a “high-cost” loan, down from 12% last year; and
  • 10% took out a loan from their employer, down from 11% last year.

Similarly, there was an improvement in respondents’ ability to meet their payment commitments:

  • 26% fell behind with credit card repayments, down from 27% last year (but higher than 5% in 2019);
  • 25% fell behind with store card repayments, down from 28% last year (but higher than 20% in 2019);
  • 18% fell behind with their home loan repayments or rent, down from 19% last year (but higher than 7% in 2019).

However, 35% said they had fallen behind with paying a household bill, up from 34% last year and 24% in 2019.

Cutting back and working harder

According to the survey, South Africans are coping with financial pressures in at least two (positive) ways: cutting back on expenses and working harder.

Expenditure cuts included:

  • Putting major expenses on hold, 30% of respondents;
  • Switching to cheaper supermarket brands, 33%;
  • Switching to cheaper TV streaming options, 33%;
  • Moving to the cheapest cellphone or data packages, 28%;
  • Cutting down on domestic help, 30%;
  • Giving up gym subscriptions, 28%;
  • Downgrading rented property, 15%; and
  • Moving their children to a cheaper school, 9%.

Many respondents are taking on more work to bring home extra cash, with 51%, up from 47% last year, saying they freelance or do contract work in addition to their permanent job (33%), or have a second, after-hours job (7%), or have side-line business (19%).

Working multiple jobs is most prevalent among respondents aged 18 to 29.

By income band, working a second job is most prevalent among respondents earning R15 000 to R24 999 a month (10%). Most people (48%) doing freelance or contract work in addition to their permanent jobs earn R40 000 to R59 999, while side-line businesses are most prevalent (26%) among those earning R60 000 to R99 999 a month.

But some have resorted to desperate measures

Worryingly, however, some South Africans have turned to online gambling in an attempt to make ends meet.

The survey found that 44% of respondents say they gamble online regularly or occasionally, although 21% said they have tried online gambling but no longer do so.

Of those who currently gamble online, 65% said they do so at least once a week. Those in the highest (48%) and lowest income brackets (47%) are the most avid gamblers. Not surprisingly, younger respondents are more likely to be online gamblers.

The top two reasons for gambling online were to win money to spend on luxuries (57%) and for the fun or excitement (45%) – this was particularly the reason among those earning more than R40 000 or aged 50+.

But 37% of respondents – mainly in the lower-income band – said they gambled in a bid to survive financially, while 23% said they gambled because they wanted to win back the money they have lost.

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