A Decade of Purposeful Partnership

The journey to successfully understanding South African households has been enlightening. The Momentum/Unisa Household Financial Wellness research project is now its in 10th year. It has sometimes been disheartening but even more encouraging to better understand the state of, and changes in South African households’ finances, and how they are navigating a changing world. Here are some of the key learnings that our journey has uncovered:

1. The economic environment (of the moment matters – a lot. Favourable macroeconomic conditions (strong economic and employment growth with low inflation) improve the financial wellness of households, and vice versa. Policies that enable households to improve their financial wellness contribute to a more resilient macroeconomy.
2. Most households do not benefit from economic growth to the same degree. The benefits of economic growth and employment creation mostly benefit a small minority, namely the skilled and the formal sector employed, which contributes to their financial wellness.
3. A household’s ability to generate wealth plays a pivotal role in improving their financial wellness. Most households are unable and incapable of using their resources optimally to generate wealth from their existing income.
4. Some low-income households have been found to generate more net wealth, while many high-income households possess a negative net wealth position. Investigations revealed that, despite their financial position, many low-income households have positive attitudes towards their finances and tend to feel personally empowered.
5. Households’ low levels of personal empowerment (social capital) prevent them from benefitting financially from the favourable economic environment and moments of economic growth that the country experiences.
6. A good education, human capital, and strong sense of personal empowerment, social capital, empower a household to handle their finances with more confidence. When these capitals are combined with regularly performing personal financial activities such as comprehensive financial planning, drawing up a written budget and implementing them, households are more resilient to external political and economic changes, and subsequently improves their financial wellness.
7. A better understanding of households’ emotional and financial needs is critical for better financial planning and long-term financial wellness and success.
8. Many South Africans are financially unwell because of poor decisions and/or financial illiteracy. Households that make use of financial expertise, conduct detailed and continuous financial planning, manage their debt well, and stay informed on financial matters are in a better position to turn the tide of their financial outcomes to their favour.
9. A major shortcoming that needs to be addressed in the financial planning process is the lack of implementation. A clear financial plan should provide all the activities that must be undertaken, including the time at which it must be done, to achieve long-term goals. A solid financial plan will also empower households to guide their emotional reactions during volatile times.

A difference exists between financial wellness and financial success, but they are strongly connected. Financial wellness is a holistic reflection of the financial reality of households, while true financial success is about households achieving their goals – and should be assessed in terms of each household’s unique goals.