Crispin Sonn, Director of Corporate Affairs at Old Mutual
The value of long-range financial planning emerged as a key trend in the latest findings of the Old Mutual Savings Monitor, released today, which also shows that despite the easing of the recession, 80% of households surveyed are saving the same or less than they were last year.
According to the research, good planners save more. The challenge is to spread this critical skill to a broader audience if we are to build a financially astute society in South Africa.
Presenting the Old Mutual Savings Monitor findings in Johannesburg today, Crispin Sonn, Director of Corporate Affairs at Old Mutual (South Africa), points out that people who plan ahead, even if they have debt, are managing to service debt and save.
The research, conducted by independent research house, Peppercorn Research, also finds that South Africans have a hunger for savings knowledge.
“It is encouraging that South Africans want to know more about saving. The key challenges are broadening the reach of experts, harnessing mass media and facilitating the right conversations,” reflects Sonn, adding that the need to share financial wisdom and empower South Africans to save is pivotal to fostering a savings culture.
Another key finding of the survey is that South Africans are not saving more owing to too much mid to long term debt (bond and car repayments).
On the positive side, consumers are servicing their debt, though at interest-bearing minimum levels.
The Old Mutual Savings Monitor further reveals that upper-income groups are saving less, while young people tend to save more as they are not saddled with mid-long term debt such as bond repayments.
The lower income groups are saving more but these are cash banked savings as opposed to long-term savings. Single people tend to be saving more than couples because they don’t have to provide for homes, household expenses and children’s educational requirements.
Sonn points out that the global economic challenges have highlighted the need to build a financially literate society.
“We need to take advantage of the hunger for savings knowledge among South Africans by equipping people with better information on how to save. Conversations about planning for the future are important and they should be the focal point of our discourse.”
Rian le Roux, Old Mutual Investment Group (OMIGSA) chief economist, points out that the recent global concern around huge and growing government debt levels around the world has, in effect, highlighted the need for individuals to save more.
“With many governments around the world needing to focus heavily on reducing their budget shortfalls and containing their outstanding debt levels, an early casualty of fiscal tightening has been social security cutbacks such as pension benefits and lifting the retirement age,” says Le Roux.
According to Le Roux, with national budgets under heavy pressure, people worldwide will have to accept that governments will not be able to lend much support during their retirement years.
“People will have to care for themselves and this will likely require much higher savings during their working years.South Africa, while less constrained fiscally, will be no different.”
Sonn observes that while most people are aware that saving and planning for their future are essential to their quality of life and financial security, many do not know how to go about it.
“Our interventions should be geared towards creating a positive outlook to planning ahead because a clear vision, backed by definite financial plans, will enable South Africans to do great things with their hard earned money,” Sonn concludes.
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