Research finds majority of single mothers face retirement vacuum

Ms Shirley Koaho, Old Mutual?s General Manager for Marketing.

Many working South African women, including 53% of single mothers, have no provision for their retirement and are at risk of being financially deprived when they stop working, stated Ms Shirley Koaho, Old Mutual’s General Manager for Marketing.

That’s a key finding of the latest update of the Old Mutual Savings and Investment Monitor, released today. Every six months the survey assesses the savings habits and attitudes of ordinary working metropolitan South Africans.

“It’s a very concerning trend,” says Ms Koaho. “Single mothers’ incidence of holding life assurance, retirement annuities, short-term insurance and medical aid are now well below the average for the metro working population.”

Of mothers polled, 56% are single mothers, of which around half receive no financial help from their children’s fathers.

The survey reveals that mothers typically believe it’s more important to save for their children’s education than their own retirement.

Koaho points out that while it’s natural for mothers to prioritise their children’s education, “the long-term effect of not saving at all for retirement can’t be discounted”.

These statistics, released toward the end of Savings Month and shortly before Women’s Month in August, indicate an urgent need to help women to move toward financial independence, neglecting neither their children’s educational needs, nor their own retirement needs, explains Ms Koaho.

“It’s clear that not enough women are balancing their own and their children’s interests. But to prevent a financial struggle in their later years, women need to prepare for their own retirement; even if that means a slight decrease in the amount they currently spend o­n their children.”

In some cases parents tacitly assume that by funding their children’s education they’re enabling their children to care for them when they’re old. In fact, nearly 60% of single mothers surveyed believe their children should care for them when they’re old, while about half of single mothers feel the state should play a role.

But to rely completely o­n your children is risky, and contributes to the cycle of Sandwich Generations, Ms Koaho cautions. A Sandwich Generation is defined as that generation that is “sandwiched” between providing for their children’s financial needs and providing financially to some degree for ageing parents. The latest measure for the Sandwich Generation is 23%, up from 20% a year ago.

Consumers in limbo
In 2011 there was evidence that consumers were growing their awareness and understanding of their financial affairs. They were cutting down o­n expenses, attempting to pay off debt, and scrutinising their budgets. O­n a scale of 1 to 10, consumers gave an average of 6.3 in terms of how satisfied they were with their financial situation. That score is steady at 6.3 in July 2012, even though consumers continue to be under financial pressure. This year there are signs that consumers are feeling more unsure of what to expect financially in the short to medium term, and there’s a tendency to postpone financial planning and delay decision-making.

In debt’s grip
Another disturbing trend is that about 2 in 3 consumers (68%) believe that “there is no alternative but to get into debt”. This equals the highest recorded measure for this sentiment during the Savings and Investment Monitor history: the July 2010 score was also 68%. However, this time that attitude is accompanied by a significant increase in indebtedness: personal loans from financial services providers rose from 11% in November 2011 to 16% in July 2012.

Call for financial education
The fact that more than 80% of respondents say they want advice o­n how to save and manage their money better indicates the o­ngoing need for financial education across all sectors of the market, and for the continued development of financial advice.

Sums up Ms Koaho; “Consumers want and need financial information and advice that’s accessible, relevant and trustworthy. And they need it urgently.”

Practical tips o­n how to become a great saver:
•Be honest with yourself. Are you a saver or a spender? Select investments that suit you and provide you with the discipline you may need.
•Draw up your bucket list and separate into short, medium and long term goals. This will help you select appropriate savings vehicles to achieve these goals.
•Avoid impulsive spending o­n temptations such as special offers, unless it’s something you have been looking out for specifically.
•Invest for the long haul. Be prepared to ride out the short-term highs and lows.
•Don’t delay. Procrastination is Enemy No 1.