Financial stress has soared as a result of the Covid-19 crisis, with savings dropping and debt levels rising. 58% of households across South Africa are facing high or overwhelming financial stress, according to the latest Old Mutual Savings & Investment Monitor (OMSIM), which has revealed some alarming statistics.

The annual Monitor provides insight into what is happening to working urban household finances in real time, well before it reflects in macro-economic statistics, and help us understand the behaviour and adaptations that households make to changing circumstances.

This year the survey specifically focused on the impact of the Covid-19 pandemic and the national lockdown. The research was conducted online from 29 May – 23 June 2020 (i.e. during lockdown level 3), and surveyed just under 1 500 respondents.

A key finding is that as many as 57% of those surveyed are earning less than they were at the end of February 2020, while 40% of those currently employed only have enough funds to survive for one month or less should they lose their jobs.

As many as 66% of respondents stated that they are constantly worried about losing their job or income.

Overall, satisfaction with the current financial situation is down from 6.3 (out of 10) in 2019 to a mean score of 5.3 this year.

Lynette Nicholson, Head of Research and Insights at Old Mutual, says: “A very alarming consequence of the financial pressures South African households are experiencing is that just over 50% are currently dipping into their savings just to make ends meet, 37% have fallen behind on paying household bills and 23% have cashed in a savings/investment policy.

“Another indicator of the financial stress the crisis has caused is that only 1 in 2 credit card holders are able to comfortably make their repayments every month.”

The levels of dependency have also grown. In 2015 those with other adult dependents (excluding a spouse or partner) was at 35%. This year it spiked at 52%.

The Old Mutual Sandwich Generation Indicator shows that those who are sandwiched between supporting their own children and helping to care for elderly parents or relatives increased from 34% in 2019 to 42%, the highest figure recorded for this category.

Debt and loans are also a concerning sign of the financial stress households are under: 43% are taking personal loans from financial institutions (up from 21% in 2019), 19% of respondents are taking loans from family or friends (up from 13% in 2019) and 12% are borrowing from micro-lenders (up from 5% in 2019).

“Another interesting finding relates to SA’s informal savings. Although membership of stokvels has declined from 44% to 34% this year, there are more people now contributing to grocery schemes (from 9% in 2019 to 23% in 2020) and burial societies, (from 23% in 2019 to 38% in 2020),” adds Nicholson.

“There is no doubt that the pandemic and its effect on our economy has intensified the already dire position of households, placing unprecedented strain on budgets, savings and overall financial wellbeing,” she says.

Key financial education tips

John Manyike, Head of Old Mutual Financial Education, has the following tips:

• Always seek expert financial advice.
• Remember that during times like these, knowledge plays a crucial role in the financial decisions we make. Equip yourself with financial understanding to ensure you make the right decisions.
• Look at your finances – and particularly your expenses – really carefully and plan properly for the future.
• Consider having a ‘side hustle’ to supplement your income.
• Find ways to downscale your lifestyle to free up additional cash.
• Don’t borrow from your future and don’t be tempted to draw from your retirement savings.
• If you have already consolidated your debts to ease the pressure, avoid further credit.
• Avoid taking loans to buy things in bulk.
• Be very responsible and cautious about buying on credit to avoid debt spiraling out of control.
• Be transparent with your family, play open cards about the debts you have to service so you can manage expectations and help them adjust.
• Do not be tempted to disinvest because of panic. Markets are generally volatile during uncertain times but will self-correct over time.
• If you resign from your job during this time, avoid the temptation to cash out your retirement savings.
• Before you approach a credit provider or accept any offer of debt relief or a payment holiday, make sure you understand the terms and conditions of the agreement.
• Build an emergency fund over time. Ideally you need a safety net that’s the equivalent of 6 months of income.
• Include loyalty programmes in your emergency fund building strategy.

This article first appeared in City Press.