South African savings takes a knock

The Old Mutual Savings and Investment Monitor shows that South Africans are feeling less confident about the state of their finances than in 2013.

The report comprises of 1,000 interviews amongst 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.

In 2013, the findings showed that South Africans faced their financial situation with “renewed optimism”, with a gradual movement away from feeling the strong effects of the 2009 recession, painting a picture of consolidation and recovery.

However, according to the latest findings, this sense of optimism has been shaken, as more and more South Africans claim their financial position has worsened in the past year, and household savings trends have taken a turn for the worse.

52% of the respondents said they feel confident with the SA economy – a drop from 55% measured in 2013.

Only 29% of the households measured by the monitor indicate that they have been saving any money. Savings expressed as a percentage of household spend has decreased – however, savings in Rand terms has remained stable or even increased.

“Given this contradiction – and the possible effect on response of the prior question on amounts ‘put aside’ – we caution against placing too much emphasis on this drop at this stage,” Old Mutual said.

“Although, it does support the suggestion, evidenced elsewhere in the results, of a weakening in the overall savings environment.”

One of the hardest hit saving sectors has been savings for children’s education, with only 32% of parents with dependent children noting that they are saving for their children’s education.

On the contrary, savings for funeral expenses has continued to increase, while 66% of households indicate increasing some form of retirement provision.

There has also been a decline in banked cash savings – especially in the lower income groups, Old Mutual said, giving further evidence of the affordability pressures at this level.

According to the group, 44% of the surveyed households believe that their financial situation will improve in the next 6 months. This figure is down from 50% in 2013.

“These 2014 results highlight the fragility of the post-recession recovery that we have seen in the last few measures with cracks starting to appear in the lower income groups in particular,” Old Mutual said.

Interesting findings

  • Almost one third of South Africans indicated that they do not do budgeting;
  • Incidence of having a credit card is up slightly, from 29% (2013) to 33% (2014), and back at 2010 and 2011 levels;
  • 50% believe that death, funeral and disability cover is more important than saving for retirement;
  • Saving for funeral expenses has increased from 30% (2013) to 37% (2014);
  • About 1 in 4 property owners expect to rely in the value of their primary residence as part of their retirement funding;
  • One third of Baby Boomers (born between 1946 and 1964) have no formal retirement provision;
  • Baby Boomers have lowest confidence in the South African economy at 47%.

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South African savings takes a knock