No option but debt - survey

2012-07-23 22:15

Johannesburg - Two out of three consumers believe they have no alternative but to get into debt, the latest Old Mutual Savings and Investment Monitor has found.

"This equals the highest recorded measure for this sentiment during the Savings and Investment Monitor's history," the company said on Monday.

The sentiment was accompanied by a significant increase in indebtedness, researchers found.

Personal loans from financial services providers rose from 11% in November 2011, to 16% in July 2012.

In November 2011, results indicated that South Africans were starting to get to grips with their finances and were trying to rein in their debt.

The context of the latest results was recessionary pressures locally and globally, and political uncertainty and conflict in some regions.

In South Africa, there had been sharp increases in petrol, energy and food costs - all necessary items - and households were feeling the pinch.

Gautengers had some respite when e-tolls were put on hold, but worries about the future affect "loom large".

According to the report, there had been a shift away from "panic" and people were trying to pay off debt.

As a result, savings as a percentage of household income had increased, most evident among lower-income earners, even though it was off a low base.

However, the proportion of metro households saving more (31%) was still outweighed by those that said they were saving less (37%).

The drop off in credit card penetration seen in November 2011 had been maintained, but people were still just paying off the minimum balance required.

The drop off in other (non-card) short- to medium-term credit, seen in November 2011, reversed.

Higher-income consumers had increased their take-up of car finance and overdraft facilities.

Credit extension in the form of personal loans and hire purchase had grown in the middle- and lower-income brackets.

Researchers mentioned the "vulnerable" position of single mothers, in particular.

They appeared to be lavishing money on their homes and children, often at the expense of long-term savings for themselves, and were neglecting providing for their own retirement.

Of the mothers polled, 56% were single mothers and half received no money from their children's fathers.

Fifty three percent of them had no retirement plan, believing it was more important to save for their children's education.

They assumed that by funding education, their children would look after them later, or they felt that the state should play a role.

  • lacrimose.wolf - 2012-07-24 00:12

    I'm punch-drunk financially. Too many retrenchments etc. But YAY OM and OM advisor my PENSION investment lost nearly 10% in the last year. So not only, on the edge of 50 trying to get the house paid for, the debt reduced but also trying to catch-up on my retirement. Yay! 30% of my retirement investment loses money. Ja, all you Inv guys go for it with the "risk" and "let the buyer beware" etc. I'm not a financial person. I'm a human being who invested and got totally burned. 15 yrs away from retirement and now my 'projected deficit' is R4.7MILLION. I couldn't save or invest in that even if I time-warped back to when I started earning @21

      amanda.victor.92 - 2012-07-24 05:03

      They get rich and support the government. It's all a scam. They have zero interest for your best interests.

      JaredVN - 2012-07-24 07:21

      I find it very rich (pardon the pun) that the piece above comes from an Old Mutual adviser. The obscene fees charged by greedy companies like OM on their "savings" products are a major reason why people don't save. How many times do you hear that people get a nasty shock when they find out their investments have been destroyed by these pigs' fees?

      viljoenfr - 2012-07-24 11:44

      Hi LW I don't know your situation, but are you really being honest with yourself when you say it wouldn't make any difference if you could go back to age 21? I just find that hard to believe. Wouldn't you be in a better financial situation if you lived more frugally, made less debth and spent more time learning about how to invest wisely? People are responsible for their own finances. Saying "I'm not a financial person" doesn't cut it. That is like having a child that you don't take care of and then saying "I'm not a father type of guy". In both cases it is just not taking responsibility. I'm sorry if this sounds harsh and once again, I don't know your situation. But really, people have to learn to take responsibility for their finances.

  • peter.fraser.92754 - 2012-07-24 05:16

    Are these surveys real / I have a very big circle of friends and family and none of them thinks about getting more into debt.Aint make sense.

  • warwick.railton.7 - 2012-07-24 06:49

    If the etolls come into effect, there will be more misery. There is no win here for the general public. The SA taxpayer gets nothing out of thier taxes.

  • Don.Tandy - 2012-07-24 07:16

    Getting into debt for things other than high cost items like a car or house is one thing - getting into debt for general living and luxury items is just plain stupidity when you consider what it costs just to meet interest payments, which is like throwing money away. No sympathy at all for most people in debt.

      denise.herbst.5 - 2012-07-24 07:54

      Wow Don - obviously you have lived a charmed life. Must be nice when life never throws you curve balls and you get to be so judgemental.

      Don.Tandy - 2012-07-24 09:17

      No Develyn, I have not lived a charmed life. I have had my fair share of hardships and curved balls - health issues, retrenchment (twice), forced sale of houses (at a loss), and many more - but I have always lived by the principle of not spending money I haven't got, with the result that I am now completely debt free and thinking about retirement and travelling. Yes I am very judgemental, because it pisses me off when I see people living the high life on borrowed money, knowing full well that they are not going to be able to pay it back, then becoming a burden on someone else. If you want to call being frugal and careful with my money a charmed life, then so be it, but I cannot emphisise enough that getting into debt for general living and luxury items is perhaps more than plain stupidity and more like outright recklessness.

      viljoenfr - 2012-07-24 11:50

      I'm with you on this one Don. The trick is to realize that life is full of curve balls and manage your money in such a way that you can take a hit or two without having to make debt.

      lance.hurly - 2012-07-24 14:23

      Curved balls are definitely a health issue Don... Deepest sympathy... lol

  • badballie - 2012-07-24 08:34

    The entire capitalist system is based on debt, its little wonder that this then flows over into the mentality of the private citizen as well.

      napolita.kio - 2012-07-24 11:23

      @badballie - Given that debt is an obligation owed by one party to a second party; then, which "system" is NOT based on debt??

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