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Financial Wellness – more about the mindset and less about the money

12 March 2014 Estelle Scholtz-Mare, Momentum
Estelle Scholtz-Mare, Head of Financial Wellness Marketing at Momentum.

Estelle Scholtz-Mare, Head of Financial Wellness Marketing at Momentum.

In just one month South Africans have endured a 0.5% increase in interest rates, a petrol hike and an announcement that the cost of meat was going up by 15%. A half per cent interest rate increase may not sound like much, but for those South Africans who have a bond of one million rand or more, it will have a significant impact on their budget, especially if added to that is a car loan and credit cards. For years, financial experts have been telling consumers to take advantage of low interest rates to pay off debt but the advice has gone unheeded. We are still as credit-hungry as ever – spending as much as 76% of our income on debt repayment. A hefty chunk of this debt goes to financing entertainment and gadgets, not wealth-building assets like property and/or education.

Estelle Scholtz-Mare, Head of Financial Wellness Marketing at Momentum, says that the industry’s manner of ‘finger-wagging’ to get people to be more responsible with their finances has had the opposite effect. "It takes a lot more than just harsh words to get people to really change their behaviour – we must provide them with tools and structured solutions that will help them navigate the sometimes stormy waters of their financial wellness,” she says.
 
Momentum developed a set of free online solutions to help individuals navigate their financial world. In October 2013, they launched this suite of solutions to help individuals identify and monitor their financial wellness. These solutions are available on www.momentum.co.za under the ‘Your Financial Wellness’ tab.
 
Scholtz-Mare says: "We have developed a set of four solutions; MyFinTrack – a budgeting tool that gives you a real-time analysis of your budget; MyScore – a tool to help individuals identify financial strengths and weaknesses; MySmarts – useful calculators to plan your finances; and MyFiling – a way to store all your important documents online.”
 
Notwithstanding that these tools can play a major role in getting people on track, it is important to understand that financial wellness is not an end goal, it is a journey and a mindset. All the clever tools in the world will not make a bit of difference to an individual if they do not see the benefits of changing their behaviour. In order to effect behavioural change, people have to see the consequences of their actions in black and white, the good, the bad and the not so pretty.
 
By using a tool like MyScore for example, an individual can see exactly where they are going wrong and how vulnerable they are. Professor Bernadene De Clercq, Head of the Personal Finance Unit at the Bureau of Market Research, says that useful tools are only part of the equation.

She says: "Real behaviour change comes when individuals understand that financial wellness does not just fill up the bank account, it gives them freedom of choice. When you are financially well and have all of your bases covered you will have more disposable income than the average over-indebted person. This means that instead of having to choose between a government or a private school for your child, you will be weighing up the best of the private schools.”
 
This shift is key because it changes the perception of saving from a loss (if I save I will have less to spend) to if I save I will be able to buy what I want. The notion of ‘loss aversion’ is a huge human driver so we need to create a compelling reason for people to commit to saving.
 
Scholtz-Mare says that it is interesting to find that the idea of needing to save for retirement does not motivate people, since it is only a ‘future activity’ in their minds. There are too many ‘now’ activities competing for our money. Thus, we need to motivate people by telling them that they are saving for a future in which they go on a world cruise or buy a beach house. As Scholtz-Mare emphasises, "It’s still saving but one implies limitations and dreaded old age whilst the other talks to a fabulous lifestyle. Yes, it’s subtle, but it is a vital part of negating our ingrained aversion to perceived loss.”
 
Financial wellness will best be achieved if debt-strapped consumers take stock of their finances, trim any unnecessary spending and work towards a point where month-to-month fluctuations in the economy have little or no effect on them, concludes Scholtz-Mare.

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