South Africans running out of money

South Africans are finding it difficult to accumulate wealth due to the high cost of monthly living expenses and added pressure from high debt servicing costs.

Most South Aricans struggle to accumulate wealth due to these financial constraints, which necessitates finding additional sources of income. 

This was the finding of the annual 1Life Insurance Generational Wealth Survey, which said that 55% of respondents had to supplement their income by taking on another job or starting a side hustle.

South African households continue to feel the pressure of the country’s high cost of living despite the formation of a new government and lower interest rates. This has a drastic effect on people’s spending habits and overall lifestyle. 

Of the 55% who earn additional income through side hustles or taking second jobs, 44% of respondents spend it to cover monthly expenses.

Living expenses, which include groceries, energy, transportation and communication, account for around 85% of monthly income. 

Due to living expenses making up such a large portion of monthly income, the majority of respondents claimed that they do not earn enough to generate wealth. 

1Life’s Truth About Money money coach and facilitator Haley Parry said that an alarming 65% of respondents cannot afford to generate wealth in their current financial situation. 

Additionally, the vast majority of respondents indicated that they were merely surviving or struggling financially.

The survey found that only 15% of their respondents are coping financially, with about 13% saying they are comfortable. Only about 2% of South Africans indicated that they are thriving financially. 

While consumers struggle to afford basic necessities, and most do not have a retirement plan, the awareness of generational wealth is growing. 

Parry described it as encouraging to see money and other assets, like land and property, associated with generational wealth. 

The overwhelming majority of people associate land and property with generational wealth.

However, there has been an increase of 10% in the amount of respondents who associate capital and savings with generational, bringing it to 74% of respondents. 

“While financial pressures persist, we are seeing an encouraging increase in the recognition of generational wealth, particularly in property, savings, and insurance,” said Parry. 

“It is promising to note that half of the respondents acknowledge life insurance as a tool for wealth generation, which is a crucial step toward financial security.”

Since a large portion of people’s income is allocated to necessities, they have less money available for savings, investments, and leisure activities. Only 3% of the respondents indicated using their income for leisure and travel. 

Furthermore, despite a lower inflation rate than in the previous years, only 13% of respondents reported that they were in a better financial position this year. 

However, about a third of respondents indicated they were in the same financial condition as the previous year. This is not to say that all people’s financial positions have been stagnant. 

Of the respondents, 25% managed to pay more towards their debt, paving the way for long-term financial freedom, while 26% indicated they can now save money. 

However, household debt remains a large monthly expense and prevents many from accumulating wealth and saving. 

The country’s high interest rates have kept households’ average debt cost burden at its highest level in 15 years. The survey found that 45% of respondents spend at least 30% of their monthly income to service debt. 

“The findings reinforce the urgent need for effective financial planning and education to help South Africans achieve financial security,” Parry said.