Do we have the right financial attitude?
24 August 2016
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On mobile, on digital, on demand, this is Old Mutual Live, the Money Coach edition. Hello and welcome, my name is Chris Gibbons. Joining me now from Old Mutual in Johannesburg is Lynette Nicolson, Research Manager at Old Mutual. Lynette, welcome, good to have you with us.
Lynette Nicolson: Hi Chris.
CG: The focus on this edition of Old Mutual Live Money Coach, the recently released 2016 Old Mutual Savings and Investment Monitor, one of the most in depth studies on how, where and why South Africans save. Lynette, times are hard, times are very uncertain.
We’re talking about global factors like poor demand, Brexit, things like that. Local problems like sluggish growth, political uncertainty, high unemployment. What do our attitudes reveal about how we are dealing with all of this? Let’s just start with a definition of we can, what do we mean when we say ‘attitude?’
LN: I think attitude has to do with your mind-set and that’s how I interpret it. What is your attitude, what is your outlook? So that would be my definition of attitude.
South African’s are concerned about the economy
CG: Then what are the key findings in the Savings and Investment Monitor 2016 about attitude. Let me guess, worries about money, right up there, top of the list.
LN: Absolutely, so I think before even worrying about money, I think there’s a concern for the South African economy. People do think about that, because that influences. We have so much media these days that everyone is up to date.
I think that’s first and foremost, worried about my own financial situation, my household financial situation. My own job, how secure is my job and especially people with kids as well. How secure am I to provide for my children?
CG: At the centre of all of this is that phrase: Financial security.
LN: I think so, absolutely so and we see that people are less satisfied with their financial situation. Of course one could always say, is anyone ever satisfied? But certainly in prior years we’ve seen greater satisfaction levels where this year, well, that has been declining over the past few years.
CG: How do we think of ourselves? Do we see ourselves as, for example, spenders? I’m a spender or I’m a saver. Do we categorise ourselves like that?
LN: That’s an interesting one because we include the statement saying ‘I’m a spender, not a saver’. In years gone by we interpreted that as people just being frivolous. Saying yes, I spend more than save. But I’ve started to see over the last few years that people are interpreting this as, I am a spender, yes. I’m spending to get by, so that makes me not a saver.
There’s been this little shift in the interpretation of that statement, but I think yes, you are still going to get the people that the minute the salary comes into the bank account, at the end of the month, there’s lots of spending that goes on. But I think people are starting to look really seriously at what they’re spending and trying to find ways to cut back.
How do we change attitudes?
CG: Now, how do these attitudes change Lynette, across income brackets?
LN: Income brackets, I actually don’t think they change that much. I think that when we talk age, there might be quite a bit there. Where your younger person who is looking to make their place in the world, who is bombarded more and more with pressurised things. What to do; and buying cars and buying a home.
I think there definitely is something there and entertainment for younger people. I think spending on entertainment is huge there, where it’s not so great in the older categories. Income levels, you know, even attitudes around dependency, which I’m sure we’ll touch on, it’s not that skewed towards income category.
CG: What about changes across racial lines?
LN: I also think that that is not that skewed, with the exception of one. It might not be talking to attitude, but I do think it is because I think it all boils down to that; is when we look at the incidence of informal savings, then you definitely get a different picture across the racial categories. That is an attitude, because it’s your attitude, it’s your outlook on what you think is going to be good for you and your situation and so that’s where you save.
CG: What are the other key attitudinal perceptions? For example, you talked about dependency. How do people feel about the responsibilities towards their own children?
LN: We’ve seen an increase Chris, year on year, of the number of people that feel that their children will need to provide for them when they’re old. I think it’s up to 45% this year. So you can see it’s been consistently increasing year on year. More and more people are realising that they’re not going to get by, for whatever reason. We do have the reasons, most of the reasons for that. They’re going to have to rely on their children.
What role does government play?
CG: Where does government fit into the attitudinal picture?
LN: We do ask people how much they think they’re going to have to rely on the government, if they are unable to take care of themselves. Consistently it really hasn’t increased or decreased. It’s round about one in three say that they’re going to have to rely on the government, to some extent.
Whether that is through grants, whether that is through old age pension. The scary thing there for me is when one analyses that by age, you even see the younger end of the population. Saying that yes, they think that to some extent they’re going to have to rely on the government.
CG: You’re listening to Old Mutual Live, the Money Coach edition, on demand, visit dogreatthings.co.za. Lynette Nicolson is Research Manager at Old Mutual, Lynette, are we confident, are we optimistic, perhaps, about South Africa as a whole?
LN: We have seen a significant decline in confidence in the South African economy year on year. We had, last year, just to give you an example, we had about one in two, just over one in two people; or one of our respondents saying: Yes, I feel confident in the economy. Remember, this was done around about March/April last year. This year, March/April and bearing in mind all the things that have taken place during that time, we have 31%, massive decline.
CG: Then, apply that for me to the way we make financial decisions. Are we confident about our financial decision making?
Is there confidence in making financial decisions?
LN: No, I think that goes hand in hand. I think we’re feeling a little bit unsettled about the economy and what’s happened and that makes us all a bit unsettled. Not really knowing where to go or what to do and we do have a lot of people saying to us: I don’t actually know where to go. Where do I go for advice, who can I trust? I think that’s coming through in a number of ways in the survey.
CG: If we’re not confident about our financial decision making, what does that say then about the way we find information?
LN: I think what’s happened is we have so many sources of getting information that people are looking around. Yes, we have people going to their bank consultant or a bank consultant, perhaps not their bank consultant. Which is the single most, when we ask people the primary source of information, bank consultant, word of mouth.
When we’re unsure of something, what do we do? I think in any aspect of our life we ask around, what have you done? What have you done? Where did you go? Then we see financial advisers or brokers coming in third place in terms of sourcing of financial information and then the internet.
I think there’s quite a big story here for us at Old Mutual, is that the first three categories; bank consultant, word of mouth, financial adviser, all points to face to face. I’m looking for some type of face to face interaction or confirmation or information and then the internet and whatever is less popular.
CG: This has been another edition of Old Mutual Live Money Coach, my name is Chris Gibbons and with me on the line from Johannesburg has been Lynette Nicolson, Research Manager at Old Mutual. Lynette, thanks for having been with us.
Remember, please feel free to get in touch any time if you have any questions for me or topics you would like covered on Old Mutual Live Money Coach. Just feel free to send them direct to me at firstname.lastname@example.org. I would be delighted to hear from you. Until the next time, thank you for listening, Old Mutual Live, on mobile, on digital, on demand.