This is how South Africans spend their money

How much of their income South Africans spend on things like food, housing, and retirement differs greatly depending on their salary band.

A recent DebtBusters study tracked the spending patterns of consumers who applied for debt counselling across five income groups.

The take-home income groups are: under R5,000 a month, between R5,000 and R10,000, R10,000 and R20,000, R20,000 and R35,000 and more than R35,000.

The report found that, on average, South African consumers spend 68% of their take-home pay on debt service.

DebtBusters executive head Benay Sager said the study provides interesting insights into how South Africans in different income bands prioritise their spending outside of debt repayments.

“For example, there is surprisingly consistent spending across all income groups on transport, utilities, and cellphones, but spend on accommodation differs significantly,” he said.

Specifically, almost all consumers spend around 13% of their disposable income on transport, around 11% on utilities, and about 5% on cellphone contracts.

“Excluding debt repayments, people taking home less than R5,000 spend 9% while those earning between R10,000 and R20,000 allocate 31% for housing, more than any other income band,” Sager said.

Grocery spending also differs markedly. Households with less take-home pay spend a greater proportion on food.

The lowest earners spend more than half of their non-debt-repayment disposable income on groceries, compared to the two highest income groups, who spend around 25%.

This proportion declines across the income bands. For top earners, the comparable ratio is just under a quarter (23%).

Unsurprisingly, spending on insurance, including medical aid, is negligible in the two lower income bands but increases from 1% in the R10,000 to R20,000 band to 13% amongst top earners.

Interestingly, the lowest and highest income brackets spent the least on rent and housing, while those earning between R5,000 and R35,000 spent the most – between 24% and 31% of their income.

DebtBusters explained that higher electricity costs and food inflation have forced people in the lowest income band to pool their resources more effectively to cut back on housing expenses.

Over the past three years, the proportion of non-debt-repayment take-home pay these consumers spend on accommodation has more than halved from 20% to 9%.

This contrasts with people taking home between R10,000 and R20,000, the backbone of the country’s working population.

Excluding debt repayments, they spend 31% of their take-home pay on housing, an increase of 7% in three years. To make ends meet, they cut back on groceries and spend more on their children.

In comparison, South Africans in the top income bracket spent the largest percentage of their income on child maintenance and schooling.

The two highest income brackets also spent around 2% of their income on security, which other income brackets didn’t invest in.

“Unsurprisingly, but worryingly, spending on retirement is all but non-existent: only the top two income bands allocate some money to retirement savings,” Sager said.

This shows that with the recent changes made to the two-pot retirement system, there is much work to be done to educate South Africans about long-term saving.

Put differently, on average, South Africans with a take-home pay of R20,000 or less are saving 0% for retirement.

This means that these income brackets spend more on cell phones and bank charges – between 2% and 4% – than they do on saving for retirement.

The study found that while people earning R35,000 or more have the highest debt-service burden, they also have more stable budgets with the least fluctuation over the past three years.