Sanlam has announced the findings of its first study that measures the financial confidence of South Africa’s adult population.
“Financial confidence” is the level of assurance and belief in one’s ability to manage and navigate one’s financial life effectively, Mariska Oosthuizen, Sanlam’s chief marketing officer, said in a statement released on Tuesday.
“Personal finances have a profound impact on human behaviour, influencing decision-making, lifestyle choices, relationships, and overall well-being. When individuals are financially confident, they are more inclined to experience a higher level of overall happiness and satisfaction,” Oosthuizen said.
Sanlam used the research to compile its Financial Confidence Index. The index aims to establish a benchmark for measuring financial confidence and associated behaviours among South Africans. The research will be conducted annually.
The research found that:
- Less than a third (29%) of South Africans surveyed have a high or very high level of financial confidence.
- More than half (51%) of those surveyed have below average or lower financial confidence.
- Just over a third (35%) have very low or low financial confidence.
The study surveyed more than 1 500 respondents between the ages of 20 and 70 with a monthly personal income of at least R1 000 from various sources, including employment, grants, and pensions.
About 70% of those sampled had a monthly income of less than R15 000. Only 12% of the respondents had a monthly income of R40 000 or more, and 8% had a monthly income of between R25 000 and R39 999.
Thirty-eight percent were in full-time employment, 19% were self-employed, and 18% were described as pensioners/retired.
Twenty-eight percent of respondents had only a matric-level education, while 61% had a diploma, or a graduate or postgraduate degree.
The research found a strong link between education, income, and confidence. Individuals with less education tend to earn less, making it harder for them to achieve financial confidence.
“A disparity in education often begets a parallel disparity in income, resulting in a domino effect that gradually erodes financial well-being, leaving individuals with diminished resources to build their financial confidence,” said Dr Mavis Mazhura, an international behavioural science and performance specialist.
The survey uses three behavioural finance indicators to assess overall financial confidence:
- Financial determination, which reflects an individual’s proactive mindset and commitment to achieving his or her financial goals.
- Financial resilience, which represents the capacity to bounce back from financial setbacks or unexpected challenges and adapt to changing circumstances while maintaining a sense of stability.
- Financial well-being, which signifies the overall state of financial health and satisfaction, where individuals have the resources and knowledge to meet their present and future financial needs.
Most are not financially well
When it comes to financial well-being, the results show that a considerable proportion of people are unhappy about their current financial situation, stressed when dealing with their day-to-day and month-to-month personal finances, and anxious and afraid because they don’t have enough investments for the future.
Of those surveyed:
- 83% are unhappy about their current financial situation.
- 82% are scared they don’t have enough investments for their future.
- 81% experience stress when dealing with their day-to-day personal finances.
- 76% feel uncertain about their ability to earn income in the future.
- 69% feel self-conscious or scared when talking about money.
- 67% feel their assets are unprotected.
- 67% feel upset or embarrassed about their financial situation when growing up.
- 58% feel hopeless about their debt situation.
The research looked at financial resilience in terms of four components: financial management, financial control, financial skill, and financial support.
The financial management component found that:
- 60% of those surveyed are confident that their financial decisions align with their financial values.
- 57% feel they manage their finances in a way that makes them feel secure.
- 53% are building wealth and not only paying off debts. This low percentage explains why few feel they can handle a financial setback, Sanlam said.
- Only 45% feel on track towards meeting their financial goals.
- Only 35% review their finances with an expert annually.
Sipho Mncwabe, the head of adviser transformation at Sanlam, said South Africans need the expertise and support of a knowledgeable financial adviser to bridge the gap between financial intentions and actions.
“An adviser can impart crucial knowledge and can guarantee the customisation of plans based on individual needs, but very importantly, they can act as an accountability partner in the execution of financial plans,” Mncwabe said.
Few South Africans trust their financial abilities
When it comes to financial skill, only 35% of South Africans trust their own financial abilities, with the lowest levels of self-trust reported among individuals aged 40 to 60 years old.
Mncwabe said this finding reveals a worrying gap in financial guidance and underscores the requirement for financial education and advice to build self-trust.
Despite a lack of self-trust in their financial abilities, 57% of respondents felt confident in identifying appropriate financial products for their needs. This sentiment was slightly less common among individuals aged 40 or above, suggesting a potential generation gap in financial literacy and awareness, Sanlam said.
The younger age groups display higher confidence and self-trust and demonstrate more proactive financial determination, likely contributing to their capability to identify suitable financial products. The age-based disparity in confidence could be influenced by different life stages, rather than solely indicating a skill deficiency in older individuals, according to the survey.
The study found that 67% of those surveyed have the courage to negotiate prices and repayment terms, indicating either a certain level of assertiveness in managing their financial matters or necessity-based negotiation because of tight economic circumstances.
Nearly 70% of respondents were eager to upskill themselves so could increase their earning power.
Insurance gap
When it comes to financial support networks, the survey found that 52% of respondents have access to credit if they need it. Similarly, 52% felt they could rely on friends and family in financial emergencies.
Additionally, 43% of respondents believed they could turn to their social circles to gain financial knowledge, indicating the importance of informal networks in acquiring financial insights.
One of the areas of concern is that only 34% of respondents have insurance products in place to cover their financial risks, indicating potential vulnerabilities in times of unexpected hardship.
Only 42% of respondents have insurance cover for estate duty in the event of their death.
Click here to download the full Financial Confidence Index report.
