The latest Old Mutual Savings & Investment Monitor report for 2019 shows that South African households remain under pressure and are being forced to tighten their belts as the sluggish economy and rising prices erode their ability to make ends meet, or put money away for retirement or a rainy day.
The report is based on 1,000 household interviews among working South Africans living in major metropolitan areas, and examines levels of savings and investment as well as their attitude to finances in general and savings in particular.
While the survey points to South Africans finding some optimism in 2018 compared to a painful 2017, things are still far from relaxed, with many households finding the need to cut back on monthly spending just to make it to the next payday.
“There should be no surprise that we noted a significant increase in the number of households experiencing financial stress,” said Lynette Nicholson, research manager at Old Mutual. “This year’s survey shows an average 25% increase in households suffering major stress due to money issues.”
“Lower income households are under the most pressure but it is certainly significant that middle to upper-income families are showing higher levels of financial stress as well.”
42% of respondents said they struggle to make ends meet each month, while 73% said they are constantly worried about having enough money.
More than half (58%) said they do not feel financially secure enough to cover an unplanned emergency, and the majority (60%) do not feel confident that government will be able to provide for them and their families if they cannot do it themselves.
When it comes to saving money every month, Old Mutual’s data shows that irrespective of household income, people are now looking how to cut back on the basics – with cheaper food and clothing topping the list.
Households are also cutting back on entertainment and entertaining, reducing how often they go out, or have friends and family over for a social gathering.
Cutting back vs not spending at all
The data needs to be read in context of how many people actually make use of the various products and services, however.
In previous years, the proportion of households cutting down on items and services has been far greater.
Now, fewer households are making cutbacks – only because so many have already reached a saturation point, or have stopped incurring costs in many categories completely.
For example, while 15% of people indicate they will cutting back on using domestic workers (vs 61% in 2016), this relatively low figure is weighed against the fact that 79% of households indicated they do not employ a domestic worker at all, and a further 8% said they have cut back on these services as much as they can.
A similar trend can been seen in items like medical aid, car/household insurance, alarm systems or allowances – where the majority of households simply do not incur these costs anymore.
The table below shows what percentage of households that still spend in the category said they would be cutting back on each item. Included is the number of total respondents who say they no longer spend money on each item.
The table below shows how households are cutting back, according to income levels: