How Do You Rate in Managing Your Money?
While comparing yourself with others in terms of abilities, accomplishments and wealth is often unproductive and futile, it can be insightful to see how others manage their money. Are you faring better than your peers in income band, age group and gender, or are you doing worse – in which case, can their performance motivate you to take steps to improve?
The annual Old Mutual Savings and Investment Monitor tracks the financial attitudes, behaviours, and priorities of working South Africans earning over R8 000 per month, and it serves as a barometer of the financial health of the country’s employed population.
According to Vuyokazi Mabude, head of knowledge and insights at Old Mutual, this year’s report reflects a marked improvement in financial sentiment, despite economic conditions remaining tough. Three-quarters of respondents believe their financial situation will improve in the next six months, the highest recorded since the Covid-19 pandemic in 2020. This optimism is most pronounced among the Gen Z market, with 89% anticipating healthier finances in the future.
While there is still much room for improvement, the report shows a distinct trend among working South Africans to better manage their money and know more about financial matters.
Side hustles
The report shows that side hustling and entrepreneurship have become deeply embedded in the lives of working South Africans. The proportion of respondents earning income from multiple sources is high at 57%, rising to 75% among those aged 18 to 29. Almost half of respondents (48%) own or part-own a business.
Financial priorities
The top four financial priorities among respondents were: “Making sure that my job/income is secure” (60%), “Cutting expenses wherever I can” (48%), “Paying down debt wherever possible (48%), and “Build up a financial buffer/more emergency funds” (37%). Predictably, the priorities of cutting expenses and reducing debt were lower in the 18-29 age group (33% and 38% respectively), although this group placed high priority on establishing an emergency fund (44%).
Spending
Over two thirds of respondents (69%) said they find themselves often or sometimes overspending. Compulsive buying together with the rising cost of living and unexpected expenses are reasons cited for overspending. On the positive side, a healthy proportion of 31% said they rarely spend outside of their monthly budget.
However, a breakdown of how people use their money is instructive: on average, respondents spend 44% of household income on consumables and living expenses (up from 41% last year), 19% on servicing debt, and 15% on medical aid and insurance. According to the study, they are saving the rest (22% of household income).
Debt
South Africans have some way to go to reduce their reliance on debt, a major cause of financial stress. Almost half of respondents (47%) said they worry about debt, up from 43% last year. Debt stress was highest among respondents aged 30 to 49 years (51%), those earning under R30 000 a month (53%), and women (53%).
Welcome news is that 57% of respondents said they had less debt now than a year ago, and this is especially so in the 18-29 age group (66%). Only 11% of respondents said they had more debt than a year ago.
Saving and investing
As mentioned above, respondents say they are saving 22% of their household income. The number of people dipping into their savings remains high at 45%, but down from a high of 54% two years ago. Those who cashed in an investment earlier than planned or paused contributions to their investments have declined from 15% and 9% respectively to 13% and 3%.
Worryingly, many people appear to be hoarding cash, with 39% saying that unbanked cash formed a significant part or most of their savings.
Top savings goals were saving for a comfortable retirement (28%), for children’s education (26%), and building an emergency fund (24%).
