With the economy on the road to recovery, interest rates at their lowest levels since 1974 and inflation falling within government’s target range, South Africans now, more than ever, need to focus on saving for their future as best they can.
The recent Old Mutual Savings Monitor, a bi-annual survey of metro South Africans’ savings behaviour and attitudes, shows that many of us are part of the “Sandwich Generation” — the generation squeezed between ageing parents and children, having to support both of them.
This is because our parents are living longer, we are starting families later and we have children staying at home longer or even kids coming back to live with us after embarking on their careers (research shows that about 69% of South Africans between the ages of 18 and 24 live at home, while 45% of those between the ages of 25 and 34 live at home).
In fact, 23% of South Africa’s working metro population belongs to this Sandwich Generation — way higher than people in First World economies like the US/Canada (around 14%), the UK (10%) and Japan (6%).
Financially, saving for our retirement and supporting both our children and our parents is placing a huge burden on this generation and is reducing savings and investments.
Two-thirds are reportedly more cautious with their existing investments than they would be otherwise.
In the US, the situation is similar, though there are fewer people “sandwiched” — still, the majority of those have reduced or spent savings to cover living expenses and roughly half have failed to make at least one rent, mortgage, credit card, car loan or student loan payment over the past year.
According to Old Mutual, there’s another sandwich category — the “Club Sandwich Generation”.
This refers to people over 50 who are sandwiched between ageing parents, adult children and grandchildren; or people in their 30s and 40s with ageing parents and grandparents, and children. There are even more family members to think and worry about.
Old Mutual says, quite correctly, that the Sandwich Generation needs assistance and it has offered the following advice:
- Adopt a careful and collaborative approach to financial planning, taking a generational view of the whole family’s needs. According to Lynette Nicholson, head of research at Old Mutual, the approach should be ‘what’s good for the family”, not just “what’s good for me “. Nicholson says Old Mutual is looking at how it can address the very particular needs of this generation.
- Don’t dip into your retirement savings, no matter how tempting this may be. Rather than stretch your finances to assist your teenager with education, suggest they take out a small loan. This is not to plunge them into debt, but to teach them responsibility and encourage them to think of what is best for everyone.
- Become an Organiser. Organisers, as opposed to Procrastinators, are better prepared for the future because they plan and seek knowledge. Organisers are found in both higher and lower income brackets and are not linked to higher LSM tiers, so don’t despair if you’re not a high earner — you can still put a good savings plan in place. It’s been proved that those people who plan ahead manage to save more and, even if they have debt, they manage to service their debt better than Procrastinators.
- Scarily, awareness of the need to save doesn’t necessarily drive positive savings behaviour; neither does the fear of not having enough. Only a willingness and ability to organise and stick to a financial plan ensures wealth and financial freedom. If you need help with this, enlist a financial adviser who can assist you with managing your money smartly — say, showing you where to hold back on spending and where you can divert money in terms of paying off debt faster (like putting extra into a home loan, where applicable).
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