Middle-income South Africans use up their entire salary less than five days after being paid

The CEO of FNB Retail, Raj Makanjee, explained that a middle-income salary - ranging between R7,000 and R60,000 per month - simply isn't enough to last for the entire month. He told Business Tech:

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.

Where does the money go? The data showed approximately 40% of consumers spend more than 50% of their salary on debt repayments. Christoph Nieuwoudt, CEO of FNB Consumer, said that microlender loans and store cards take the blame for this, and added that FNB considers these figures to be very high.

In addition to that, about half of the consumers surveyed also miss at least one debit order during the year due to the financial pressure they find themselves under.

According to a survey published by Standard Bank in 2015, approximately 29% of middle-class salaries went to contribution of medical aid, insurances and pension funds, followed by 20% for food, beverages and tobacco. The third largest expense was transport-related costs, at 15%.

Up to 60% of household spending was on essential items, and Standard Bank also found that 59% of expenditure by low-income households went towards non-durable goods and food, making these households more susceptible to food inflation.

Image credit: Pixabay Also read: What is the average take-home salary in South Africa?

Ways to save money In light of the data collected by FNB, the bank urged members to maximise programs such as eBuck Rewards and Bank Your Change to increase their savings power, and to ensure that the correct credit card is used for purchases:

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.

Additionally, consumers can schedule an automatic transfer to a cash investment account. Saving money for a rainy day usually falls by the wayside if not planned in advance, simply because it's so easy to use the money set aside for savings for other purposes. Having a scheduled transfer set up in advance removes the temptation of spending the money.

Also Read: Difficult times are still ahead of South Africa - Dawie Roodt suggests investing offshore

Tags: BankingSouth Africa

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