Financial wellness, what does that mean? Am I financially well? How do I evaluate if I am financially well or not? Let’s find out the answers to these questions and so much more, below.
The recent Momentum Science of Success Festival revealed that one of the most critical components to financial success is behavior, irrespective of income or social standing. While unavoidable macro factors like petrol prices and the political landscape influence household financial success, the Momentum/Unisa Household Financial Wellness Index found that a change in behavior is still the difference between the 25% classified as financially well and the remaining 75% that are not. Even the smallest change in behavior and regular habits can accelerate one’s journey to financial success. (Yasss, this ones for us Millenials).
“Financial Success shouldn’t be reserved for a few. At Momentum, we believe that everyone in South Africa deserves to have the relevant information to support them on their journey to financial success. Our DNA as a business is to enable the achievement of goals through our solutions and the advice we offer. And this is why this partnership with Unisa has been such an important one for Momentum – this report over the last eight years has provided us with insights to understand the realities faced by the communities we serve,”
– said Nontokozo Madonsela, Chief Group Marketing Officer at Momentum Metropolitan Holdings.
Households’ state of financial wellness in 2018 remained relatively flat compared to 2017 – and only just higher than four years ago. The overall score increased just slightly to 67.9 points – from 67.8 points in 2017 and 66.6 points in 2014. Since the start of the index in 2011, the score increased steadily meaning more households are not as financially unwell as they were before.
Of the five pillars that make up the Momentum/Unisa Household Financial Wellness Index, South Africans’ personal empowerment capability scored the lowest, which fell to 4.8 (out of 10) from 5.1 in 2017. This decline can be attributed to political instability and negative macroeconomic events that are beyond the control of households. However, when comparing households that achieved high and low personal empowerment capability scores, it showed that the majority of households actually did poorly on factors they could control.
Johann van Tonder, Economist at Momentum said-
“The 2018 index noted that personal empowerment capability has been a long-term thorn in the side of most South Africans. It is the cause of many financial challenges for households as they feel disheartened by circumstances, lack knowledge and do not possess the facts on a number of issues.”
Education attainment and personal empowerment are critical on the road to financial success, but they must be accompanied by the right behavior. This includes goal setting, budgeting, saving for now and the future, debt management and planning for life incidents, such as pregnancy, illness or retrenchment.
“Access to expert financial advice and developing financial savviness will empower households to make the right financial decisions that will positively impact their economic circumstances,”
says Van Tonder.
“The research and our partnership with Unisa remain critical for our business to understand the financial issues facing South African households. Applying the scientific formula for momentum: P=M x V; we know that mass (M) times velocity (V) creates momentum on your journey to success. If one considers that mass represents the individual and their potential, knowledge, education, and velocity the specific factors and behaviors that can either accelerate or decelerate their journey to success, you begin to paint a picture of the opportunity South Africans have to turn their financial situations around.”
Analysing the research, the team at Unisa and Momentum concluded that specific and comprehensive interventions are needed for financially unstable and distressed households, especially female-headed households. The index showed that households where a female is the most financially knowledgeable person, earned only 36.8% of all salaries and wages, pulled in 31.8% of investment income and took home just 23.4% of net profits.
When added together, lower salaries, lesser net wealth and education scores negatively impacted the financial wellness of households where a female has the most financial knowledge. Around 20% of salaries earned by females come from women with a tertiary qualification, but they only constitute 8.8% of women. The research showed a need to improve women’s ability to take control of situations, their financial literacy, access to affordable and quality financial advice, assistance with financial planning and goal setting.
“The conversation will always be relevant,” said Madonsela. “Momentum invites everyone to join the #SuccessIsAScience conversation on social media, share what they’re struggling with, and those who are a few steps ahead, to share their hacks and tricks using #SuccessIsAScience.”