Research published by financial services group, Old Mutual, shows how many South Africans would be adequately prepared for a one-off financial shock of various denominations, ranging between R1,000 and R100,000, given the decline in the macroeconomic environment over the past year.
In its Key Savings & Investment Trends report 2017, Old Mutual found that most households are under immense pressure and making it from pay day to pay day is a fine balancing act.
The research is comprised of interview among working South Africans living in major metropolitan areas, and examined attitude to finances in general and savings in particular.
- Less than R6,000 – 22%
- R6,000 – R13,999 – 28%
- R14,000 – R19,999 – 14%
- R20,000 – R39,999 – 22%
- R40,000-plus – 14%
In 2017, at total market level, all bar 1% working households can handle an unforeseen expense of R1,000. At R100,000 the vast majority (85%) would not be able to handle this sudden shock.
- Friends, savings, and to a lesser extent stokvels, are the go-to sources for an unexpected expense of R1,000 in very low income households.
- The tipping point comes earlier in 2017 with 42% unable to cope with an expense of R5,000.
- Friends and savings are the primary sources for a R1,000 unforeseen expense.
- Formal loans gain traction at R5,000, although access/reliance on personal loans shows a declining trend for amounts of R10,000 and over.
- Over half cannot cope with an unforeseen expense of R10,000.
- At R50,000 the vast majority of households in this bracket can’t cope
- Savings are the primary source for expenses of R1 000 whereafter borrowing steps in.
- As the amount of the expense climbs, so borrowing from friends and family drops off in favour of institutional borrowing.
- This income group is more resilient, and while “bail out” points are earlier than in 2016, they are only marginally so.
- Credit card continues to be used extensively up to R10,000.
- Formal loans popular especially for amounts in R10,000 – R50,000 range.
- Only half could handle an expense of R50,000 and 1 in 4 bail at R10,000.
- Credit cards are very popular for amounts up to R10,000.
- Low incidence of loans from family/friends, with preference for formal loans for larger amounts.
- Home loans also remain popular for amounts north of R50,000.
- Resilience levels fairly steady.
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