South Africans’ financial wellness on the increase

Although various reports released during 2016 and 2017 have shown that South African households are under pressure, the Momentum / Unisa Household Financial Wellness Index 2016 published by Momentum and the University of South Africa (UNISA), showed that on average the Financial Wellness among the population has improved over the past six years.

According to the report, from 2011 to 2016, the average overall Financial Wellness score has increased from 64.1 to 67.3.

“However, despite this improvement South Africans indicated that they do not feel in control of their lives, disempowered to turn bad situations around and are distrustful of government and other institutions which are supposed to improve their lives,” says John Mill, Head: Momentum Financial Planning.

The score is obtained from five household wellness sub-indices, which make the overall Financial Wellness score. The five indices are human, social, physical, asset and environmental capital.
Environmental capital (living conditions) showed some improvement, from 6.2 to 6.4. The increase is attributed to improvement in urbanisation, government residential infrastructure and housing development programmes.

“The decrease in asset capital (net wealth) score from 5.8 to 5.0, “is understandable,” says Mill. “Real asset growth and real net wealth growth were negative between 2015 and 2016.”

Despite the increase in South Africans’ Financial Wellness as a whole, there are also many households that remain under pressure. Within the four household financial wellness groups 2.3% are financially distressed, 31.4% are financially unstable, 40% financially exposed and only 26.3% are financially well.

“More than 70% of South African households are still not financially well,” says Mill.
“Those in a less than adequate financial situation can experience a positive difference in their finances if they turn to knowledgeable financial advisers for assistance,” says Mill.

“Research shows that South Africans do not believe that the advice given by financial advisers are in their best interests, but to assist them in changing their financial status from a negative to positive situation, they do in fact prove to be invaluable,” says Mill.

He adds that consumers need a proper financial plan and they need to engage with it on a regular basis. The more financial literate they become the better decisions they will make regarding their financial affairs.

“In most instances it is not simply about selling policies, but rather supporting our clients to plan better and become more financially literate. This will increase financial stability beyond where we are today. And create a whole new market as well as increasing the demand for well qualified financial advisers, something we are passionate about,” concludes Mill.