Wealthy South Africans are not necessarily better at saving and spending their money – and many ‘well-off’ South Africans are living from paycheque to paycheque.
This is according to new research from Discovery Bank, which collected data on 4,700 South Africans who had an average income of around R630,000.
Speaking at BusinessTech’s Digital Banking Conference on Thursday (5 March) Akash Dowra, head of technical marketing at Discovery Bank, said that the data shows that there are five key money behaviours which result in about 80% of defaults in the country.
These behaviours include:
- Whether or not they spend more than they earn;
- Whether they have insurance;
- Whether they save for emergencies;
- Whether they have enough savings for retirement;
- Whether they manage secured debts poorly (eg. they tried to pay their house off as quickly as possible).
When looking at the data collected from the wealthy respondents, Discovery’s data shows that 64% of the respondents said that they spend 100% of their income every month.
A further 8% of respondents said that they spend between 90% – 100% of their income every month.
Other notable findings from the study include:
- 28% of retail affluent South Africans spend more than they earn;
- Less than one third have the recommended three times salary saved;
- More than half of homeowners;
- One third do not have short-term insurance and a quarter do not have life insurance;
- Less than 5% can retire comfortably.
To address these issues, Dowra said that Discovery Bank is actively ‘nudging’ its clients into making smarter financial decisions.
‘Nudging’ – a term from a book by behavioural economists Richard Thaler and Cass Sunstein, is widely seen as an effective way to persuade people to make better decisions.
Dowra said that the Discovey Bank follows this technique by encouraging good behaviours through the awarding of higher statuses to clients who meet the above five criteria.
These statuses, similar to Discovery Vitality’s levels, are based on specific financial profiles and habits and are not determined by social class, earning power or income level, he said.
While there are better rewards associated with higher levels, Dowra said that the best benefit was the tangible shift in behaviour as clients make better financial decisions.