SA middle class uses exercise, denial to cope with financial stress

Cape Town - South Africa's middle class is stressed and 73% claim it is because of their financial situation.

The most popular way they try to cope with financial stress seems to be strict budgeting (58%), followed by physical exercise (32%). While 4% use medication to cope, 20% indicated that they "prefer not to think about these issues" and 12% said they are simply not coping.

These are some of the findings of the 2017 Sanlam Benchmark Survey. The annual retirement funding study looks at the financial wellness of employees in the workplace. The sample consisted of 1 317 well-educated professionals with 60% earning more than R300 000 per year.  

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The survey shows financial stress has reached dangerous levels among professionals in South Africa and has become pervasive both at the workplace and in the home.

"The middle class in South Africa is stressed and this stress has a negative impact on people's lives," Viresh Maharaj, CEO of Sanlam Employee Benefits: Client Solutions, explained on Wednesday at a media briefing on the latest survey.

"Yes, there are macro-economic issues, but lifestyle choices have - to a large extent - led to the situation they find themselves in."

It turns out short term debt - for instance, car payments, credit cards, personal loans - is the primary source of the stress for 55% of respondents, while 41% worry that they won’t have enough set aside for unanticipated emergencies.

About 30% stress about paying for school and/or university fees, while 33% stressed because of extended family financial obligations or requests for financial help.

Junk status

"The survey indicates that almost half of SA's middle class are living in junk status - unable to meet their debts," said Maharaj. "There is no silver bullet answer, but if more people are helped to manage their finances better, it can make a difference."

Another important issue raised by the latest survey in his view, is a gap regarding medical aid funding after retirement. Three in five respondents said they are not making provision for their medical aid premiums in retirement.

“The research shows that financial stress impairs the quality of our lives and diminishes our ability to be productive at work,” said Maharaj.  

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“This is our middle class - the spine of our economy, our tax base and our hope for the future. And they are stressed. We believe that the findings point to a dire need for financial coaching and increased employer involvement in the financial wellness of employees.”

The survey also found that nearly half of the respondents find their income was too little for their expenses at least a few times a year. One in three respondents said they cope with their debt by reducing expenditure, while one in five said they borrow from friends and family to make ends meet.

Help needed

“Our people need help. And, in this context, help means advisers who are able to work with the middle class to educate and help coach them towards consistently displaying the right behaviours and making better decisions," according to Trurman Zuma, CE of Sanlam Personal Finance: Savings.

“Access to and affordability of quality advice are issues across the middle class and more so for blue collar workers - but this can be addressed via the mechanism of the employer. Workplace based financial wellness programmes provide the opportunity for employers to address the drivers of their employees’ financial stress at scale - and in an inclusive manner."

In the survey, 60% of respondents indicated that they would be interested in such programmes.

The survey found that 52% of respondents had a financial adviser or broker. The source of financial advice for 41% was indicated as being family members, friends or colleagues. About 26% said they just do their own thing and hope for the best, while 35% said they just Google everything.