MOMENTUM-UNISA HOUSEHOLD FINANCIAL WELLNESS INSIGHTS 2020: See the upside of a world turned upside down
Unisa’s partnership with Momentum to obtain a better understanding and insights of South African household finances has been running for nine years. This year’s Momentum/Unisa Household Financial Wellness Insights report served as the backbone of the 2020 Momentum Science of Success Festival, held in Johannesburg as well as broadcasted via a Facebook Live event on Wednesday 25 November. It seeks to provide South Africans with an in-depth look at the state of their finances in their homes. The report provides information specially designed to inform and empower South African households to achieve financial success and recover from the possible impacts of life before, during Covid-19 and beyond.
Even before the onset of the Covid-19 pandemic in the country, and the implementation of a lockdown period in March, the South African economy was not a positive environment within which companies and households could thrive. Economic growth averaged 0.8% over the past five years instead of the needed 5%, while unemployment continued to increase, instead of declining. With decelerated economic growth and an increase in job losses, more and more South Africans have now become excluded from participating in economic activity.
Although all households have been affected to some extent by the Covid-19 pandemic and resultant lockdown, the research highlights that South Africa’s middle-class households were hit the hardest as both their income and net wealth were severely impacted by factors beyond their control.
The good news is, despite the lockdown and other challenges experienced due to Covid-19, some already recovered – for several reasons – but mostly because they followed a specific recipe necessary to taste financial success. The report shows that those who experienced financial pressure due to a salary reduction dealt with the challenge by reorganising their spending patterns. This involved changing their store of preference, updating their budgets and cutting back on luxuries (financial management), and managing their debts. The adjustments that were placed at the bottom of the list included reviewing medical aid, business closure or changing living arrangements.
To be better prepared for the journey towards financial success, it is important for households to gain a good understanding of the factors that are within their control and those over which they don’t have any control. It is vital for households to know that there are ways to self-guard them against some of these factors. In order to limit the impact of factors beyond our control households should minimise financial dependence on others (including government), spending on luxuries, increase savings (for emergencies and long-term, such as retirement, insure against the uncertain and access credible financial advice.
Regardless of income level or qualifications obtained, the one key ingredient to financial success is for households to take control of their own financial journey by starting with the end in mind – have a financial plan which includes short- and long-term goals and implement the plan, regardless of events that are outside of their control. Planning and then implementing such a plan is key. A clear implementation plan must provide all the activities that must be undertaken and the specific times it must be undertaken to achieve the long-term goals. A solid implementation plan will also help to increase the financial literacy levels of households and guide their emotions during volatile times.
The report reveals the following seven habits of households that can weather a financial storm:
- They map out their journey with measurable goals and a plan to achieve them.
- They maintain their momentum by knowing where every cent goes.
- They cover and protect themselves from rainy days.
- They make the bold but intelligent choice to invest.
- They don’t let speed bumps deter them from achieving their aspirations.
- They broaden their perspective by being financially savvy and streetwise.
- They realise there is more than one path to achieving success.
The research is the result of the collaborative effort by the Bureau of Market Research, College of Accounting Sciences and Momentum.