In tough economic times, people feel the need to tighten their belts and cut back on their spending. In many instances this would mean cutting out certain luxuries that you can do without. However, at a recent Liberty knowledge sharing event, Shani Erwee, head of insights for Liberty Group, noted that people are rather cutting back than cutting out luxuries.
According to Erwee, it is important to acknowledge lifestyle urges and achieving a balance between wants and needs. “With recent research work we conducted, we found that there is still a conflict between the wants and the financial needs of the consumer markets which financial institutions serve,” she says.
One of the areas where people try to save money is insurance. “Insurance is often seen as a grudge purchase in light of delayed gratification compared to more ‘urgent’ daily needs and wants. On the surface it seems like a good category to cut back on to save money, however, how responsible is it?” said Erwee.
How are South Africans saving money?
There are two main ways in which South Africans are trying to save money. One of these is by limiting their grocery purchases. To do this they are reducing the amount of goods that go in their trolleys, not so much to save money, but to avoid paying more than previous months. Erwee noted that as a result of this, promotions and loyalty points are gaining prominence.
The second way people are trying to save money or make their money go further is by supplementing their income. This is particularly true in cases where people aren’t willing or are unable to cut back in other ways.
Erwee noted in the presentation that the area where most people look to save money is through more effective grocery shopping. The area where most people are unwilling or unable to change their spending habits is when it comes to their children.
“Only four percent of consumers in the Alltold Survey cut spending here, especially affluent households in Gauteng and Western Cape. Saving money on kids is the last thing people will resort to. Every parent wants to be a good provider and pulling back from your children is cutting a bit close to the bone,” pointed out Erwee.
Furthermore, Erwee noted that there is a generational difference in people’s attitude towards spending. “Additional value looks different to different segments. Younger generations are motivated more extrinsically whilst older generations are more intrinsically motivated and the rest fall in the middle. In summary, it’s a gambling match to keep up with what consumer’s value on the ‘outside’ vs. ‘inside.’”
Where are people willing to cut costs?
When it comes to cutting costs, the Alltold Survey listed 11 areas where there are opportunities to save money. The survey yielded the following results, according to Erwee:
- 47% of people were willing to implement more cost effective grocery shopping.
- 44% would consider generating additional income.
- 42% said they would/do make use of deals and special offers.
- 36% stated they would look for cheaper banking and finance.
- 26% noted looking at cutting back on cell phones and subscriptions.
- 23% said they would look for more affordable holidays (holidays were therefore still a luxury they were not wanting to give up).
- 21% noted they would spend less on entertainment and leisure activities.
- 19% stated they would look for more cost effective transport and travel.
- 13% revealed looking for more affordable healthcare and grooming is an area they would consider saving money.
- Seven percent noted they would look at saving money on garden and home expenses.
- As stated above, only four percent of respondents noted that they would spend less on their children to save money.
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