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Covid has pushed people to rethink their financial habits – Old Mutual

There are clear indications that South Africans are finding ways to cut back on expenses: John Manyike – Old Mutual head of financial education.

FIFI PETERS: Let’s look at what South Africans are doing with their money and how they are relating with their money in this current economic environment. According to the latest Old Mutual Savings and Investment Monitor [OMSIM], almost one in nine South Africans say that the Covid-19 pandemic has changed how they manage their money, and it’s changed it for the better. So the index looks, as I said, at the relationship that households have with their finances. It’s based on a survey of around 1 500 households with [monthly] incomes of R8 000 and above.

To tell us exactly what South Africans are doing differently this time around as it pertains to financial management at home, I’m joined by John Manyike, the head of financial education at Old Mutual. John, good to speak with you again. You and I were together earlier at the launch of the actual 2022 OMSIM report, but for the purpose of our listeners who were not there, your survey this time around suggests that South Africans have a more positive relationship with their finances. So, in practical terms, break that down for us. What are they doing differently this time around?

JOHN MANYIKE: Yes, quite an interesting report and insights from the Old Mutual Savings and Investment Monitor. We are certainly seeing that this individual optimism is on the rise and people are generally optimistic about their financial position outlook – and that’s a positive. We certainly believe that it has been paying dividends.

We are seeing people’s personal earnings improving. About 34% of people are saying – well, in comparison to the same time last year; about 53% last year said, look, we’re earning less than we were before Covid – this time around only 34%. That’s a huge improvement and very, very encouraging.

But we’re also seeing people who are higher risk-inclined, people who are more prepared to invest in cryptocurrency. We’re seeing about 44% relying on gambling as a source of income to make ends meet.

But also there’s some positive in terms of people’s confidence in their financial decision-making.

We are noting a very strong correlation between people’s confidence, their lower financial stress, and the propensity for them to save.

In other words, the more confident people are in their financial decision-making, the more likely they are to save compared to those who are not confident – which again highlights the need for financial education to encourage people and have more people more confident in how they deal with their money.

FIFI PETERS: But just break down the nuances in that confidence and in the fact that the behaviours of a lot more South Africans have turned a lot more positive as it pertains to their money. Are there differences in terms of income groups, as in: are certain income groups a lot more positive, and certain income groups a lot better in managing their finances than other income groups? Because our country is very diverse in colour, gender and pay differences. I’m wondering if those differences are reflected in the report.

JOHN MANYIKE: I didn’t particularly look at that detail, but I think generally speaking the higher a person [earns] the more likely they are to qualify for credit, and the more likely they are also to be people who are exposed to being over-indebted. So I think it’s something that one may need to look at.

But I would suspect that people who are earning more are more likely to be in debt and having financial difficulties overall, when these numbers are mainly for people who are earning R8 000-plus in the main – and these are the trends that we’re picking up from those particular individuals.

FIFI PETERS: So given what’s happening right now, today, as you and I looked at the inflation numbers that came out, and we are awaiting the Reserve Bank to do its thing on interest rates tomorrow, how are you expecting the current cost-of-living pressures to influence how consumers relate with their money this time next year?

JOHN MANYIKE: We’re already seeing consumers adopting more responsible methods of saving, and creating ways. For example, about 66% are switching more to loyalty programmes – and that’s encouraging. We’re seeing people, about 33%, switching to cheaper supermarket brands; about 33% again who switch to cheaper TV, or streaming options. Of course, when it comes to cellphone and data options [they’re] looking for cheaper ones, moving children to less expensive schools. So there are certainly different ways.

These are clear indications that South Africans are finding ways to adopt new methods to try and cut back on expenses.

FIFI PETERS: It sounds like you are also saying that a lot of South Africans have retired from trying to keep up with the Joneses and the Khumalos. They are happy to downgrade where necessary to get by and make ends meet.

JOHN MANYIKE: Absolutely. That is a firm trend that we’re seeing, and I think it’s something that most people need to consider adopting.

FIFI PETERS: All right, John, good to know. We’ll leave it there. Thanks so much for your time. John Manyike is the head of financial education at Old Mutual.

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