About 70% of South Africans are planning to save either “the same or more” over the coming six months – a decrease from the 92% who say the same thing in the previous survey.
According to the latest MasterCard survey of Consumer Purchasing Priorities: Money Management, 83% of the same consumers are uncertain about the economy and consequently are saving for “precautionary measures”, which is an increase of 16% from the previous survey.
Just under half (47%) of the survey respondents who are planning to save “the same or more” say “retirement” is their top reason for saving, a 10% increase compared to the preceding six months, followed by “investments” at 35%.
“The low savings rate in South Africa is widely reported,” says Philip Panaino, division president at MasterCard South Africa. “As such, while a decrease in saving is not ideal, given the current economic landscape, it is nonetheless encouraging to see that a significant number of South Africans are taking notice of local and global financial conditions, and that saving priorities lie in future planning.”
The MasterCard Survey of Consumer Purchasing Priorities is released twice a year and provides valuable insights into consumer outlook on spending priorities in the categories of travel, dining and entertainment, education, money management and luxury shopping.
The latest survey was conducted across 27 countries within Asia/Pacific, Middle East and Africa between November 2012 and February 2013. The survey and its accompanying reports do not represent MasterCard’s financial performance.
When asked how much of their total monthly income they’re planning on saving over the next six months, the majority (45%) of respondents say between 1% and 10% of their total monthly income. Eighteen percent say they plan on saving between 11% and 20% of their income, which is closer to the industry-recommended savings rate for retirement, while just 7% plan to save between 21% and 30%.
Half of respondents feel they can retire with enough financial support between the ages of 51 and 60, followed by 43% who say between the ages of 61 and 70. Interestingly, 5% believe they can retire before the age of 50. The average age of comfortable retirement was reported as 62, up two years from last year’s average of 60 years.
Responding to statements on financial planning, the vast majority (88%) of respondents believe that ‘it is never too early to have a financial plan’. Conversely, just 20% of respondents believe that financial planning is “only for the rich”.
Panaino says: “The survey indicates that South Africans are inclined to financial planning. This is a positive base from which to promote mindfulness and caution when it comes to managing money, and encouraging a habit of saving.”
Survey respondents were asked about the items they would cut back on in the event of a loss of household income. Dining out, entertainment and purchasing gifts were at the top of their lists, while 10% say they would cut back on their regular savings.
Conversely, when questioned about how they would spend a cash windfall; respondents replied that adding to their savings was a top priority, ahead of taking an overseas trip or domestic holiday, paying off debt or spending on home renovations.
South Africans responded well to statements gauging basic money management, with 88% believing ‘they should regularly save a portion of their monthly income’ and the same percentage agreeing that they have the “ability and understanding to budget day to day finances”.
Just over two-thirds (72%) agree that it is prudent to have between three and six months’ cash savings in case of emergency, while 69% claim to keep track of their spending on a weekly/monthly basis.
“Overall, the research results reveal that South Africans are largely aware of the need for careful money management,” Panaino says.
“They understand the importance of budgeting and saving, and are prepared to cut back on spending should they be met with an unforeseen loss of income. This suggests that many consumers are still actively taking part in their financial planning and that they are committed to setting funds aside to look after their financial futures,” he says.
Consumers in Kenya, Nigeria and Morocco were included in this year’s Survey of Consumer Purchasing Priorities: Money Management, resulting in the following key findings:
* A significant 92% of respondents across all four African countries agreed with the sentiment that they should regularly save some of their income;
* As highlighted, 47% of South African respondents say they were saving for their retirement. This is compared to only 24% of Kenyans and 31% of both Nigerians and Moroccans have the same plan;
* In South Africa, 35% of respondents say that they save through investments. Only 31% of Moroccans say the same. Kenyans (87%) and Nigerians (84%) seemed more likely to save through investing;
* An average 92% of respondents surveyed in the four African countries agreed that they have the ‘ability and understanding to budget their day to day finances’. This sentiment is strongest in Kenya (99%), followed by Nigeria (97%), South Africa (88%) and then Morocco (83%);
* Only 42% of Moroccans regularly monitor their investments, in comparison to 45% of South Africans, 87% of Kenyans and 92% of Nigerians.