As more and more South Africans experience retrenchment, job losses, and decreased job security — money is becoming more important to hold on to, and spending does not look like it did just 5 months ago.
Even though we know that this is true purely based on our social circles and interactions, it can be difficult to quantify and to know exactly what people are spending less/more on. Fortunately, Old Mutual recently came out with their latest Savings and Investment Monitor report, which, among other things, highlighted the expenses that they expect South Africans will prioritise and which will most likely fall by the wayside.
The research, which had 1500 respondents, looks specifically at which spending changes are most likely to become a permanent shift, the different priorities of different age groups, and which spending habits will most likely stay the same.
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According to the report, about 58% of households across the country are facing overwhelming financial stress directly related to the COVID-19 pandemic. Before we go into how spending habits are going to shift, let’s quickly look at some other key findings from the report:
57% of those surveyed are earning less than they were at the end of February 2020.
40% of those currently employed only have enough funds to survive for one month or less should they lose their job.
66% of respondents said that they are constantly worried about losing their job income.
43% of the respondents have taken personal loans from financial institutions.
19% of the respondents have taken loans from family and friends.
“A very alarming consequence of the financial pressures South African households are experiencing is that just over 50% are currently dipping into their savings just to make ends meet, 37% have fallen behind on paying household bills and 23% have cashed in a savings/investment policy,” Lynette Nicholson, Head of Research and Insights at Old Mutual, said in a statement.
“Another interesting finding relates to SA’s informal savings. Although membership of stokvels has declined from 44% to 34% this year, there are more people now contributing to grocery schemes (from 9% in 2019 to 23% in 2020) and burial societies (from 23% in 2019 to 38% in 2020).”
Expected Changes in Spending
According to the report, younger consumers are more reluctant to spend less on entertainment, take-aways, eating out, and travel. Older people (50+), on the other hand, are less likely to cut spending on armed response, insurance, assistance to children, and medical aid.
This essentially points to the fact that younger people are more likely to prioritise lifestyle items while older individuals are more likely to prioritise more practical items that directly affect their safety and future.
However, in general, eating out, entertainment, take-aways, and entertaining friends/family at home are the most likely to get cut first, while medical aid, accommodation, and insurance are the least likely to be cut.
The table below shows the rebased figures which indicate how spending patterns are set to shift for people that already spend money in that category:
“There is no doubt that the pandemic and its effect on our economy has intensified the already dire position of households, placing unprecedented strain on budgets, savings, and overall financial wellbeing,” Nicholson added.
“There is no greater time than now for people to make responsible and informed financial decisions to ensure they can withstand the pressure and not compromise their long-term savings goals and financial futures.”
Check out the full report here.
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On Wednesday, July 29, our sister-platform Go Hustle in partnership with Old Mutual, will be hosting a webinar on savings, side hustles and knowing your financial, business and emotional worth. The discussion will not only give you insights on how to save towards a goal, but will also show you how to turn a side hustle into a reality with real advice from businesswomen who have done it. You don’t want to miss this one!
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