In order to fully understand what financial wellness is and what it means to households across the nation, Momentum teamed up with the University of South Africa (Unisa) in 2012 to compile the annual Momentum Unisa Household Financial Wellness Index and the quarterly Momentum Unisa Wealth Index.
Insights from the 2017 Momentum Household financial wellness index:
- Financial Wellness research revealed that at least three quarters of South African households are under financial pressure
- “The vast majority of South Africans do not have enough money to support their lifelong financial journey, not necessarily because of income or money shortfalls but due to not understanding the power of managing finances, which results in households not planning and managing their capital (or behaviour) optimally. As a result, the average person does not have a clear understanding of their financial situation and how to plan effectively for today and for the future.
Based on insights gained from the financial wellness research five primary and specific financial needs have been identified for Planning and managing money:
- Protect yourself
- Protect your family
- Protect your belongings
- Plan and prepare for your future
33.8% of Financially Well households agree that they have enough resources for retirement, only 12.2% of Financially Distressed households agree with this statement.
The variables over which they have no or little control include:
- stagnating economic growth
- high levels of unemployment
- volatile changes in the value of the rand exchange rate
- a severe drought
- policy uncertainty and political instability.
These resulted in low levels of business confidence, higher prices and interest rates, retrenchments, exclusion from participation in the economy and an increase in the number of children born in poverty.
There are, however, also many households that are under pressure due to bad management of variables within their control. These include:
- Low levels of financial literacy,
- Absence of comprehensive financial planning
- Not making use of professionals for financial advice
- Conspicuous consumption
- Incorrect use of credit
- High levels of indebtedness
- No provision for emergency expenses
- Insufficient provision for retirement and protection against risks.
Many households earn low incomes and therefore cannot save, leaving them in a weak financial position. Another reason for a weak financial position is where households do earn sufficient incomes, but do not use this income wisely.
Households across the Financial Wellness spectrum are not happy with their debt situations. This is not surprising given that households are deeply indebted. According to the National Credit Regulator (2017) more than 52% of credit active consumers had one or more accounts in arrears in December 2016.
- How do you shape up? What is your individual financial wellness score? Click here to find out.