Most South Africans are not as financially sound as they should be.
We tend to save less than the population of many other countries and have higher debt, with credit use growing faster than employment. In addition, many South Africans are underinsured and insufficiently prepared for their retirement.
Interestingly, these factors have nothing to do with income level, but rather with financial behavior.
Discovery Bank CEO Hylton Kallner explains that changing financial behavior may be easier said than done, but the risks of not changing our financial practices are significant for individuals and the country.
Better financial health comes down to doing five things:
- Spend less than you earn
- Save regularly
- Insure yourself against high costs or unexpected events
- Pay off real estate as soon as possible
- Investing for the future and retirement
Discovery Bench 2018 Research Why people are typically unable to meet financial obligations shows that these five specific behaviors, if left unmanaged, are associated with 80% of financial defaults.
“Without adopting this behavior, we can expect even higher levels of unpayable debt and exposure to lost revenue or unplanned expenses that are financially draining. In the long run, more people will not have enough income when they retire,” says Kallner.
How much you earn does not determine your financial health
Financial health is much less about how much someone earns than what they do with their money.
Kallner explains, “Earning a high income does not necessarily equate to being financially resilient or financially free. It’s about being aware of how your actions can affect your financial health over time. Discovery Bank’s research confirms that people with lower incomes who control their financial behavior tend to be in better financial health than people who earn more but are behaving badly financially.”
This can be clearly seen in the way people deal with debt.
Discovery Bank research found that 35.9% of people with incomes between R500,000 and R1 million per year have missed repayments on their credit facilities, while 9.1% have missed three or more consecutive repayments. These numbers are only marginally better than for those making less than R250,000 a year – with 37.7% missing repayments and 13.1% missing three or more repayments in a row.
Solutions for a stronger financial future
There is a clear link between financial literacy and financial health. In an international financial literacy survey, South Africans scored the lowest of the 20 countries.
Kallner says, “With a better understanding of financial services and products, people have more control over their finances. Those who have the habit of saving regularly at the beginning of each month have emergency savings and can deal with unforeseen life events. Likewise, those who follow a budget have more money left in a month.”
The more you understand about working with money, the better your financial decisions can be made, including debt management and retirement planning. To encourage the five positive financial behaviors, Discovery Bank is applying Vitality’s lessons that change health behaviors (exercising more, eating better, and health screening) through Vitality Money.
Vitality Money is an integral part of Discovery Bank’s product offering. It encourages people with personal goals to save, manage debt and find ways to invest. all the financial education tools and rewards are ultimately there to help customers better manage their money.
“We know that changing behavior can be challenging. With Vitality Money, people develop a better understanding of how financial behavior today can affect them in the future. The rewards of better money habits are immediately apparent with Discovery Miles, personalized interest rates and more.
“Over time, behaviors such as saving, investing, and insuring against unexpected events contribute to a healthier financial future,” concludes Kallner.
Check how healthy your financial behavior is with the Vitality Money Status Calculator† It will take a few minutes of your time to learn more about your finances in the five behaviors that determine your financial health. Know how to change it and take control of your finances today – Discovery Bank can show you how.
The Vitality Money Calculator is for informational purposes only and does not constitute financial advice. Consult your financial advisor before making any financial decisions.