More stokvels and rainy day funds are being created as pandemic pressure forces people to save.

According to a recent survey, financial pressures caused by the Covid-19 pandemic have caused people to change the way they think about and manage their money, particularly when it comes to saving and building up buffers for future crises.

Old Mutual released its Savings and Investment Monitor for 2021 on Wednesday. The survey, which began in 2009, examines the savings and investment habits and behaviours of South African working metropolitan households.

A total of 1 500 respondents, all of whom earned at least R8 000 per month, were polled.

The survey was previously conducted in person, but due to the pandemic, it has been moved online.

Notably, 87 percent of respondents said the pandemic had changed the way they thought about and managed their finances.

 

“There is no doubt that consumers are having to take a much closer look at the way they manage their money and many are having to adapt their lifestyles to survive,” said Lynette Nicholson, head of research at Old Mutual.

Stokvels and emergency funds

The financial priorities of people have shifted slightly. More people are ensuring they have enough emergency funds, up from 33% last year to 37% this year.

According to John Manyike, Old Mutual’s head of financial education, more people are realising that having an emergency fund is not a luxury, but rather a necessity.

According to Manyike, loyalty programmes have also become a new way to save – or a new type of “emergency fund.” According to the survey, 69 percent of respondents have used points or rewards earned through loyalty programmes.

 

Stokvels, an informal savings vehicle, saw membership increase to 54 percent, up from 46 percent last year. Respondents are also increasingly involved in more than one stokvel, with 36% belonging to two and 17% belonging to three or more.

Notably, burial societies are also more popular, with 56 percent of respondents claiming to belong to one. This is an increase from 50% in 2020 and 24% in 2019. “That’s a sign of the times,” said Nicholson.

Grocery scheme membership has remained consistent, with 31% of respondents indicating that they are a member of such a scheme.

 

Settling debts

More people are also aware of the dangers of bad debt, said Manyike. Half of respondents are now prioritising paying off debt, compared to 40% last year. The survey also showed that 62% of households were focusing on cutting expenses where they can, down from 67% last year.

Even fewer (26%) are concerned about investment security, down from 32%. About 36% of those polled said they reduced their use of domestic help. As an extra layer of security, nearly a quarter (23%) of respondents have reviewed their insurance policies to ensure they have adequate coverage.

People’s lifestyles have also changed to accommodate the changes brought on by the pandemic. According to the survey, 39 percent of respondents switched to cheaper supermarket brands, 25 percent switched to cheaper cell phone or data options, nearly a third (31 percent) replaced gym memberships with exercise at home or on their own, and 18 percent moved in with family members to save money.

Poly-jobbers

In order to improve their income situation – nearly half (47%) of respondents said they have more than one job, a phenomenon Old Mutual has dubbed the poly-jobber. Nicholson said that people opted to be poly-jobbers mostly to cover bills and “survive” day to day, while there is a portion of them who do it for wealth creation.

Izak Odendaal, investment strategist at Old Mutual Wealth, noted that increased saving was reflected globally.

“In the last year we see savings rates in many countries increased sharply,” he said. This is partly because people were unable to spend, or travel and had accumulated money in their bank accounts. Another reason people have been saving is because they are “scared and unsure” about the future, he said.

Following the crisis, it was natural for people to increase their financial reserves. It remains to be seen whether this is a permanent shift in behaviour, or whether they will resume spending once they are more confident about the future, he explained.

According to the survey, the recent civil unrest has had a negative impact on respondents’ future expectations. Only 31% of South Africans are optimistic about the country’s economy, down from 34% prior to the unrest.

 

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