What stands in the way of South Africans attaining their financial aspirations?

We need to affect behavioural and attitudinal change in consumers if we are to foster a culture of saving among South Africans

Awareness of the need to save does not necessarily influence positive savings behaviour, nor does the fear of not having enough savings for that rainy day, the Old Mutual Savings Monitor research has found.

What drives savings behaviour are attitudes to organisation, planning and knowledge seeking.

The research also revealed that savings behaviour does not necessarily correlate with certain universal truths such as concern about retirement funding, trying to avoid debt and giving one’s children the best opportunity in life.

Presenting the Old Mutual Savings Monitor in Johannesburg today, Crispin Sonn, Director of Corporate Affairs at Old Mutual (South Africa), commented that poor financial habits are at the root of poor money management.

“We need to focus on the actual behaviour change to help people break old habits and start new ones that will enable them to achieve their financial aspirations,” says Sonn.

Another key finding of the study is that about one in two South African households are saving less than they were a year ago, owing to a culture of non-saving; low financial literacy levels; over-indebtedness and prevailing tough economic conditions.

“The decline in household saving is a concern, as today’s levels of savings have a critical impact on future economic growth,” observed Sonn.

Stokvels/savings clubs emerged as popular savings vehicles among black households – across all income categories and remain a significant savings vehicle. And “social contracting” is a main contributor to this growing trend.

“Stokvels have remained resilient during these tough times, demonstrating their broad appeal,” says Sonn. “This presents a challenge to the financial services sector to find creative ways of incorporating stokvels into the formal savings arena.”

* What are South African households saving for?

Old Mutual’s study revealed that 31% of households are saving for their children’s and their own education, about 19% are saving for a deposit to buy a house, while 15% are saving to pay off debt.

The data also showed that about 22% of households are saving to buy a car. Entrepreneurship was less of a priority amongst households, as only 7% are saving to be their own bosses.

* What are Generation Y’s (born 1980+) attitudes to savings and financial matters?

The study found that saving for the future is not a priority for the youth and they consider themselves spenders, not savers. The majority of respondents felt that in today’s society, there is no alternative but to get into debt and they place a lot of value on having material things.

Generally, Generation Y’s attitudes to savings are quite positive compared to older generations. While they admit they prefer to spend rather than to save, they do have relatively positive attitudes towards financial knowledge, planning and discipline.

On the whole, it emerged that Generation Y’s are saving for emergencies, buying a car and a deposit to buy a home.

* Spare a thought for Generation Z (current 12-18 year olds) …

Members of this generation are coming through the ranks and the solutions we craft should take their realities into account if we are to create a future generation of savers with solid financial behaviour.

They should be the focal point of our interventions if we are to achieve the desired behavioural changes in the long run.

“We need to assign the highest importance to starting young because the older you are, the more entrenched are behaviours - and the harder it is to change,” says Sonn, adding that incorporating financial literacy and money management skills into a variety of subjects is the right way to go.

Increasingly South Africans are introduced to the realities of spending, saving and finance at a younger age.

It is essential that as we teach adults and parents, we equip the next generation of investors with sound financial management principles at an early age. The aim of the financial education intervention should be to help South Africans by improving financial discipline and knowledge across all income groups.

* Looking forward … solutions

We live in a country that is alive with possibilities for our citizens to realise their dreams. As we learn new ways of managing our money, we strengthen the fabric of our families and communities. And ultimately, we are able to pursue our dreams and secure a future filled with financial success.

The global economic challenges have highlighted the need to ensure a financially literate society. There is a need to intervene through a strong focus on financial education because the life of financial success begins with a strong education.

There should be a concerted and collaborative effort by business, government and other interested stakeholders to mobilise and grow the nation’s savings.

“We need to affect behavioural change and learn more about the incentives that we can use to motivate people to save” says Sonn.

Delivering a speech during the launch of Savings Month in July, Deputy Minister of Finance, Nhlanhla Nene, said: “Fostering a savings culture requires making saving a ‘cool’ and intelligent choice.”

However, there are positives. According to Sonn, there are a number of reasons to feel more confident about saving in the future. South Africa’s demographic profile is improving, with the saving age group projected to increase in the next few years.