A survey undertaken by 1Life, during National Savings Month in July, has brought forth the dire reality around South Africans’ spending habits. While 99% of consumers surveyed realise the importance of savings, 54% of them save less than 5% of their monthly income, citing the main reason as not earning a high enough salary (79%). Further to this, results show that, while the importance of saving is understood, a high number of consumers are reliant on credit to merely ‘get by’ each month.
“If we look at statistics such as these, there is no doubt that South Africans are struggling to make ends meet. We believe this is a consequence of a lack of financial education, irresponsible lending by certain organisations, the inability to delay gratification as well as, a struggling economy,” says Laurence Hillman, MD at 1Life.
“This further highlights the importance of surveys such as these, where – if we understand the serious nature of South African consumers’ finances, as businesses, we can look at driving solutions to assist them in better managing their money. This includes: educating them on delayed gratification, ensuring that they understand how to get out of debt, and making sure that they are educated on future financial planning. The key however, is that consumers understand that they don’t have to pay an arm and a leg for this type of literacy and education.”
Furthermore, 44% of consumers are unable to cover their monthly expenses using merely their income where – coupled with this – 31% have taken out a loan in the past year and 68% have more than one store account.
“We have to ask ourselves; if consumers are already not able to cover expenses with their monthly income – how are they able to service the debt created through loans and store accounts? It is a catastrophic problem and is drastically impacting debt levels in South Africa and worse, consumers’ ability to get themselves into a sound financial space – it is, in fact, a snowball effect,” adds Hillman.
1Life research suggests that 77% of respondents have a monthly budget in place but further research indicates that South African debt levels are at 72%. This indicates that for every R100 a person earns, R72 goes towards debt, leaving little room for monthly expenses and tangible financial obligations – let alone inflation.
“If we consider that 40% use their credit cards for monthly expenses, it is highly likely that this budget is not getting used correctly and consumers are using them as a guideline, rather than a mandatory financial management tool,” continues Hillman.
Furthermore, the Savings Month research indicates that only 12% of consumers have taken a financial education course, with the rest (82%) citing affordability as the reason for not doing so.
“It is for this reason that corporate South Africa has a fundamental role to play in ensuring accessible financial education around money management, debt management and financial planning – and that we take definitive steps to educate consumers around tools that are available to them and how best to manage their money,” says Hillman.
“1Life strongly encourages consumers to access Truth About Money which provides free access to financial advice, tips and guidelines, as well as access to a financial education course, wills and estate planning and debt management. It is our corporate responsibility towards ensuring that consumers have a place to go to educate themselves on financial matters and ensure that they are able to become financially free,” concludes Hillman.
About 1Life: 1Life, owned by Telesure Investment Holdings, is a registered Financial Services Provider. Launched in March 2006, the company provides long-term insurance solutions with products that are simple, convenient and tailored to every client’s individual needs and affordability. 1Life believe that financial solutions should change lives, not just the situation that clients find themselves in, and they have made Changing Lives the cornerstone of their business ethic. They pride themselves on being South Africa’s first truly direct life insurer and offer obligation-free advice to provide the right cover according to an individual’s needs and life stage, and are able to adjust this cover as significant life changes take place. 1Life is reinsured by Hannover Re and is committed to Black Economic Empowerment.
