A Fin24 user wants to compare the value of an amount of money in today's terms with that of 1974. He writes:
What is the value equivalent of R10 000 on June 15 1974 in today's money value?
In general, what was the monthly or annual salary of employees on June 15 1974?
How easy was it for a general employee to be able to invest a lump sum of R10 000?
Looking forward to hearing from you.
Chris Veegh, head of consulting at 10X Investments, responds:
The equivalent value of R10 000 in June 1974 is approximately R425 000 today.
Average salary is not a meaningful number, given our high Gini co-efficient - the inequality within the country's income levels.
However, assuming an average income of R20 000 per month today, this would equate to around R230 per month in 1974.
As real incomes have grown over time, the ratio of the stated investment lump sum over "average monthly income" has declined from 43.5 to 21.2 over the past 40 years.
In other words, in 1974, R10 000 represented 43.5 months' average income and in 2014, R425 000 represents only 21.2 months average income.
In this context, R10 000 in 1974 represented a significant lump sum, out of reach for most income earners, even more so than R425 000 is beyond the savings realm for the great majority of South Africans today.
- Fin24
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