Social experiment: a rethink on financial matters

Sanlam Brand Chief Executive Officer, Yegs Ramiah

Investment economist at Sanlam, Arthur Kamp

The key to financial success is simple: buy less and save more. Yet this easy-to-comprehend truth is extremely difficult to follow.

We are often taught that if we set goals, keep focused, work hard, are diligent, etc. we will achieve what we want. This is true to a certain perspective. Many people who have achieved financial success this way; would however probably be the first to tell you that they lost themselves in the process.

You could say that they have the luxury of having money so life is easier. Many would say though that if they had their time again they would do things differently, because in a world of plastic money, debit orders and generous overdrafts we often find ourselves trapped in debt as we spend carelessly.

Trying to find the right balance between money and lifestyle is the million dollar question. The point in matter is how can we achieve this? What would happen if we were forced to live entirely off coins? Would we feel more connected to our money? Would we spend less? Would we save more?

The value of money

For this year’s National Savings Month, a wealthy family, aptly dubbed The One Rand Family, has set out to live only on R1 coins for the month of July. Similar to last year’s social experiment, Sanlam has once again rolled out this educational experiment to show the mass the real value of money.

The One Rand Man was a social experiment with the aim of discovering how far removed we have grown from our hard cash. The project was designed to highlight the importance of savings for the long-term financial health of the nation and its individuals.

With his bank accounts, bank cards and debit orders frozen for the month, The One Rand Man kicked off the experiment last year with a delivery of a few large money bags containing his entire salary in R1 coins. The lessons learnt were valuable revealing how fast money disappears, what money is spent on and why money is spent the way it is.

As such, the One Rand Family has set out on the same mission, which will no doubt show us the real value of money.

A reality check

The One Rand Family, like many South African families, have a great lifestyle with a beautiful home, soaring careers, kids, great family and friends. In short they are living the dream. The only problem is the funds always seem to be low at the end of the month so there is never enough money left.

To figure out where their hard-earned money goes every month, they have made a decision to get their entire salaries paid to them in R1 coins and have locked away their bank cards, deactivated their banking apps to live only on those coins for the month of July.

“Like many families, the One Rand Family is confronted with financial choices every day. We believe their story will resonate with many South Africans and will provide valuable insights into our relationship with money. We want to explore the psychology behind money and understand the real drives of our behavior,”says Sanlam Brand Chief Executive Officer, Yegs Ramiah.

Ramiah says, “because it is so easy to spend, and to spend money we do not actually have, many South Africans find themselves spiraling rapidly into debt.”

"Since our national savings rate is so low, we believe that any insights into our money habits which may lead to increased savings, is well worth promoting,” she continues.

The money pot

In the first episode of the One Rand Family, viewers meet the modern South African family.As they weigh up their expenses and sort their piles of R1 coins into containers, in the second episode, the family begins to notice the majority of their monthly earnings are going to debt with a relatively small amount for the remaining expensesincluding the nanny, petrol, taxes, hair, nails, water and lights.

Rafiq Lockhat, a Clinical Psychologist says, “when paying with plastic, we do not really feel our spending. What you cannot see, you do not feel. The system is sneakily designed that way.”

The family estimates that they owe just over R50 000 on their credit cards. The small amount spent on pension versus the high amount on cars is the other issue. Dad Sbu, believes it should be swopped and allocated to their retirement. But wife Londi disagrees as she believes she has plenty of time to save for retirement. She says, “I have at least 25 years left to work, this is plenty of time to make a lot of money. We work really hard, we deserve to spoil ourselves.”

Lockhat says, “there is nothing wrong with Londi’s way of thinking except that it does not take into account what may happen tomorrow, next week or the week after. Twenty five years is a very long time.”

Investment economist at Sanlam, Arthur Kamp, agrees, “We should not use the age old saying of ‘tomorrow never comes’ because before you know it, tomorrow is here. By not establishing proper savings habits you are foregoing the opportunity to make your money work for you.”

“The only way to take care of tomorrow is to do something today,” he continues.

Catch the One Rand Family’s story on e.tv this month from Monday to Thursday at 5.25 pm or watch the episodes online on www.onerandfamily.co.za.

Editor’s Thoughts:
With this experiment, the family will likely become more conscious of their spending habits as they are more connected to what they are spending on with every rand used. This highlights the importance of you as a financial adviser in ensuring that clients work towards positive goals.Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.