Financially stressed South Africans living in the moment neglect planning for the future

31 Jan 2023

Yolo. Fomo. You Only Live Once. Fear Of Missing Out. These are life mottoes that have become entrenched in modern culture and are often used as hashtags on social media. However, when it comes to personal finances, Yolo and Fomo are not the way to go.

A recent Sanlam study canvassing more than 5,000 South Africans shows that failing to make the right money moves at crucial life stages has resulted in massive financial planning gaps.

The Sanlam-commissioned survey also showed more than half (54%) of respondents would advise their younger selves to think of money as an asset to grow, rather than a luxury to spend.

Despite knowing what to do to thrive financially, many are understandably focused on their short-term financial priorities rather than making financial decisions based on long-term success.

Across all age categories, most do not have core financial products such as life cover or income protection.

Zweli Moyo, executive head: strategy and impact office at Sanlam, says one of the main reasons people miss crucial moments to make sound financial planning decisions may lie in what is known as “present bias” or “future discounting”.

“This is the tendency to choose instant reward above the benefits that come with restraint, time and planning. In fact, research has found that humans cannot picture their future selves in any true capacity. When we think of our future self, the synaptic activity in the brain is the same as when we think of a stranger.”

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Key findings in the Sanlam study include:

“Enjoy your money, you only live once” came in as the lowest recommendation for younger selves across the board. Across all life stages, the two uppermost financial concerns are making ends meet and paying off debt.

From age 50 until retirement, the biggest concern after making ends meet, is retiring comfortably.

Only 10.3% of those surveyed in the 18-24 age bracket have a retirement product; with only 17.6% in the 25-29 age group having a retirement product. Unfortunately, this means the vast majority are not taking advantage of compound interest and tax breaks linked to saving for retirement.

Just 7.2% of the retired respondents reported feeling that they had prepared well for retirement. Unless people are encouraged to act early, the outcomes for future retirees are unlikely to improve.

Overall, 41.3% of respondents have life insurance.

Providing for education, leaving a legacy and even being able to buy property came in as a lower priority across all age groups than paying off debt and making ends meet. Moyo says this indicates that South Africans are living largely on the back foot, rather than being focused on financial provision for aspects of life that build wealth and success.

Greta Goosen, head of customer experience at MiWay Insurance, says if you’re currently paying off a car, a house or a loan, it’s important to settle your debt as soon as possible.

“While this might mean spending a little more in the short-term, the amount you’ll save in the long run by avoiding unnecessary interest payments will more than justify the extra expense.

“So, if you’re in a financial position to do so, allocate more than just the minimum monthly instalment so you can make your ‘goodbye-to-debt’ a quick one,” she advises.

“Competing short- and long-term priorities, as well as the natural tendency to focus on the here and now, often result in a misalignment between our intentions and our actions.

“We want to thrive financially, but we get into debt. We want to stop working and enjoy our lives, but we don’t prioritise saving for retirement. We want to become wealthy, but we don’t invest,” he says.

The key to saving lies in preparation, so draw up your own list of realistic financial goals.

Goosen says you should start by reviewing your spending habits over the last 12 months, identifying any problematic overspending and areas in which you could potentially cut to improve your financial status. Try to map out your year, making provision for months in which you might want to or need to spend a little more, with a defined end-of-year saving goal.

Mariska Oosthuizen, chief marketing officer at Sanlam, says the research shows an alarmingly low incidence of financial planning and financial product ownership and therefore resilience and preparedness among South Africans. BM/DM

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