Financial services company Momentum Metropolitan says that behaviour is the most critical component to financial success, irrespective of income or social standing.
While unavoidable macro factors like petrol prices, the international and local policy landscape still influence household financial success, the Momentum/Unisa Household Financial Wellness Index finds that a change in behaviour is still the fundamental difference between the 25% classified as financially well and the remaining 75% that are not.
Even the smallest change in behaviour and regular habits can accelerate one’s journey to financial success.
“Financial Success shouldn’t be reserved for a few. At Momentum we believe that everyone in South Africa deserves to have the relevant information and advice to support them on their journey to financial success. Our DNA as a business is to enable the achievement of goals through our solutions and the advice we offer.
And this is why this partnership with Unisa has been such an important one for Momentum – this report over the last eight years has provided us with insights to understand the realities faced by the communities we serve,” said Nontokozo Madonsela, chief group marketing officer at Momentum Metropolitan Holdings.
Households’ state of financial wellness in 2018 remained relatively flat compared to 2017 – and only just higher than four years ago. The overall score increased just slightly to 67.9 points – from 67.8 points in 2017 and 66.6 points in 2014.
Since the start of the index in 2011, the score increased steadily meaning more households are at least not as financially unwell as they were before.
Of the five pillars that make up the Momentum/Unisa Household Financial Wellness Index, South Africans’ personal empowerment capability scored the lowest, which fell to 4.8 (out of 10) from 5.1 in 2017.
This significant decline can be attributed to political instability and negative macroeconomic events that are largely beyond the control of households. However, when comparing households that achieved high and low personal empowerment capability scores, it showed that the majority of households actually did poorly on factors they could control.
Education attainment and personal empowerment are critical on the road to financial success, but they must be accompanied by the right behaviour, said Johann van Tonder, economist at Momentum said.
This includes goal setting, budgeting, saving for now and the future, debt management and planning for emergencies or life incidents, such as a pregnancy, illness or retrenchment.
“Access to expert financial advice and developing financial savviness will empower households to make the right financial decisions that will positively impact their economic circumstances.” said Van Tonder.
“Applying the scientific formula for momentum: P=M x V; we know that mass (M) times velocity (V) creates momentum on your journey to success.
“If one considers that mass represents the individual and their potential, knowledge, education and velocity the specific factors and behaviours that can either accelerate or decelerate their journey to success, you begin to paint a picture of the opportunity South Africans have to turn their financial situations around.”
Analysing the research, the team at Unisa and Momentum concluded that specific and comprehensive interventions are needed for financially unstable and distressed households, especially female headed households.
The index showed that households where a female is the most financially knowledgeable person, earned only 36.8% of all salaries and wages, pulled in 31.8% of investment income and took home just 23.4% of net profits.
When added together, lower salaries, lesser net wealth and education scores negatively impacted the financial wellness of households where a female has the most financial knowledge. Around 20% of salaries and wages earned by females come from women with a tertiary qualification, but they only constitute 8.8% of women.
The research showed a need to improve women’s ability to take control of situations, their financial literacy, access to affordable and quality financial advice, assistance with financial planning and goal setting.