This is according to data from FNB’s Retail segment which categorises middle income consumers as those who earn a gross monthly income of between R7 000 up to R60 000.
The CEO of FNB Retail, Raj Makanjee, says, “For many consumers it’s not only a matter of living from one salary payment to another, the reality is that their monthly salary just doesn’t last for 30 days. These consumers tend to struggle with money management, with the shortfall leading to sacrifices in important areas such as having back up or emergency saving that can be used to pay for unforeseen expenses. High spending and limited savings cause consumers to rely on credit to get through the month, making them more vulnerable to be caught in a debt trap.”
The CEO of FNB Consumer, Christoph Nieuwoudt explains that, “More than half of consumers miss at least one debit order over a 12-month period, indicating the pressure consumers are under. For almost 40% of such customers, debt repayments make up more than half of their take-home-pay, which we consider to be very high. The main driver of this is large numbers of microlender loans and store cards that consumers take up. The ideal scenario for a consumer is to have one provider who gives them a transactional account and the right type of credit when needed.”
FNB encourages consumers to exercise financial discipline. The Bank says financial discipline is not dependent on having greater income but requires deliberate steps. FNB provides key insights on money management to help consumers improve their financial situation:
- Bank efficiently by adopting an adequate transactional behaviour. For instance, printing bank statements, skipping debit orders and making regular or large cash withdrawals adds to your bank fees. Instead, check your statements on a banking app or online, stick to recommended free withdrawal limits or withdraw at a point of sale at a fraction of the cost while making purchases.
- Maximise free programmes such as eBucks Rewards, which rewards you for swiping your FNB Credit or Cheque card when making purchases and can save you up to 40%. These savings could help you to stretch every rand and minimise the possibility of unnecessarily incurring debt for consumption.
- Use the right credit and avoid expensive credit with no long-term value. The correct use of credit includes using the right credit for the right purpose. Relatively cheaper credit such as an overdraft or a credit card is useful for short-term purchases while a personal loan may be adequate for home renovations which can generate future value.
- Fewer credit instalments will help you to manage your debt obligations more efficiently and free up money for savings. For instance, if you have multiple personal loans from multiple providers, you need to consider loan consolidation to help you repay a single instalment which is more manageable and often affordable than different instalments.
- Synchronise your savings to your salary date and schedule an automatic transfer to a cash investment account on the day or day after your salary gets paid into your transactional account. This removes the temptation of spending the money if it was still available in your day-to-day account.
- FNB customers can activate a ‘Bank Your Change’ capability on their cheque account. The Bank will round-up the amounts charged for successful point of sale card transactions to the nearest Rand and the funds will be transferred weekly to a savings account. Customers can also top-up or save an additional amount with every purchase. Between July 2017 and June 2018, FNB customers saved more than R1bn through the ‘Bank Your Change’ functionality alone.
- Building up savings that you can access in case of emergencies is crucial, hence it’s important to prioritise an emergency savings account which can act as a buffer or safety net to help you avoid the need to take out additional credit to pay for unforeseen expenses.
- We’ve seen that 30% of middle income consumers who are saving, save for emergencies and at least one other longer-term goal. Whilst saving for emergencies is crucial in helping you manage monthly cashflow, your longer term financial goals such as retiring comfortably are also important.Understanding how much you will need in future and how much you are able to save or invest regularly are important factors in determining the appropriate investment strategy to reach your goal. Partnering with a money manager who has the necessary expertise is key to guiding you through this process.
