A recent Old Mutual Savings and Investment Monitor has unearthed some rather troubling findings about the personal finances of a growing number of South Africans. The report revealed that an increase in the number of people supporting both their elderly parents and their children is reducing their ability to save for emergencies and meet the cost of unexpected bills.
This growing group, known as the ‘sandwich generation’, has to foot the bill for their children’s education and the ongoing care of their elderly parents. The result is that their finances are becoming increasingly strained, leaving them with little or no money to pay for unexpected expenses.
The research found that 25 percent of all working metropolitan South Africans fall into this group, the highest proportion since the annual study began in 2009. Of those in the sandwich generations, 28 percent are currently overdue with debt payments. This compares to just 15 percent of working-age adults who are not financially responsible for their parents and children.
Many more South Africans are feeling the strain
The sandwich generation is certainly not the only group whose personal finances are being stretched at the seams. 41 percent of the survey’s respondents said they are able to save less than they were a year ago. There has also been a rise in the number of households earning less than R6,000, with 51 percent of all lower income households bringing in less than this amount.
The inability of many South Africans to save for a rainy day has also led to an increasing reliance on short-term credit. 52 percent of the survey’s respondents admitted they would have to rely on a personal loan or other credit facilities to pay an unexpected expense of R10,000. 28 percent said they would have no way of making a payment like that at all.
Lacking the means and knowledge to save
The research shows many South Africans lack the means to save money at the end of the month, but there is also a high number who lack the financial literacy to know how to save. A financial wellness survey by same day cash provider Wonga South Africa, found that saving remained a big issue for many of the 18,000 respondents, with only 32 percent saying they saved on a monthly basis.
There was also a troubling shortfall in levels of financial literacy as a whole. Not only did 43 percent say they did not understand what a credit report was, but 77 percent said they did not look at the interest rates and fees on credit applications. Clearly, saving is more difficult when the costs of credit are not factored into borrowing decisions.
Commenting on the survey’s findings, a spokesperson for the South African debt management company, DebtBusters, said: “Half of all credit-active customers are burdened with debt and have little or no room in their budget for savings. And those who are unable to generate savings do not have funds to fall back on for emergency expenses.”