The household saving ratio in South Africa refers to the income saved by a household during a certain period. During the fourth quarter of 2021 this fell to 0.7% from 1.20% the previous quarter. To provide a sense of how low this ratio is now, over the period 1960 to 2021 the highest quarterly ratio was 23.80% and the lowest -2.40% (Source: tradingeconomics.com and Statistics South Africa). We simply don’t have a savings culture and many institutions, including government, are trying to improve this situation through various interventions, but the progress is slow.
We all know that a lack of financial literacy has a direct impact on an individual’s financial wellbeing. We also now know that knowledge alone does not guarantee financial wellbeing. We require a combination of knowledge and the right kind of behaviour with money over the long term for us to be financially successful. And our behaviour is attributed to how we were raised with money and the psychological impacts of various events in our lives which have led to our framing and views of money.
Before we can judge people for not prioritising their financial wellbeing or attempt to help them in any way, we first need to understand their background and the things that have shaped them. We must understand the lens with which they see the world so that we can foster ways to help them, in their context. This is the only way we can effect long-lasting and meaningful change in our industry.
We don’t understand each other’s perspectives and, quite frankly, have not taken the time to educate ourselves which has perpetuated the cycle of exclusion of certain groups from specific products and services within the financial system.
We live in a multi-cultural society with many different races, languages and cultural backgrounds. With this comes many layers to work through which have a direct impact on how each person views money and, ultimately, how they handle it. This added cultural layer, over and above the psychological impacts, makes the offering of financial services and products a very complicated and difficult task.
The exclusion of black people from the financial services industry in the past has led to further complications in many people’s views and behaviour regarding money, giving rise to practices and popularity of certain products that may seem illogical to the average advisor.
We’ve been segregated for decades which has led to a lot of misunderstanding and judgement. We don’t understand each other’s perspectives and, quite frankly, have not taken the time to educate ourselves which has perpetuated the cycle of exclusion of certain groups from specific products and services within the financial system. This is because there has been an attempt to change the way people manage money without first understanding why people manage their money the way they do.
For example, the final rights of a person are very important in African culture. According to the International Network of Financial Services Ombud Schemes, more than half of South Africans have some kind of funeral plan. This high penetration is testimony to the effectiveness of a product when it speaks to the market – it is appropriate, affordable and easily accessible as there are many ways and different channels to access funeral cover.
These stats alone prove that people are willing to, and actually are putting money away for the important things in their lives, regardless of what our opinions may be of the chosen savings vehicle. The how must still be interrogated and challenged – many are still not aware of the benefits of only having one, comprehensive funeral policy versus multiple smaller ones.
Life cover is not fully understood as the more effective, long-term tool to protect against the loss of income when a breadwinner dies. Savings products with banking institutions are still marketed and understood to be appropriate long-term investments products which is a real shame. These conversations can and should be had with the general public but we won’t make any inroads if we don’t address our tone and our own prejudices when we speak to people who don’t look or behave the way we do.
However we choose to engage with the general population, our starting point should always be that of open-mindedness and compassion, first.
The acknowledgement of a person’s individuality, agency and humanness regardless of their background is crucial in the work we do. Particularly if we are to make a real difference in people’s lives. Secondly, we must be willing to learn more about each other and be willing to unlearn some of the prejudices we have if we want to be of service. Finally, a more educated and financially savvy population will benefit not just the individuals concerned, but all of us.