Five behaviours that can change your financial future

Most South Africans are not as financially healthy as they should be.

We typically save less than the populations of many other countries and have higher levels of debt, with credit use growing faster than employment. Furthermore, many South Africans are underinsured and not sufficiently prepared for retirement.

Interestingly, these factors have nothing to do with income level, but rather with financial behaviour.

Discovery Bank CEO, Hylton Kallner, explains that changing financial behaviours may be easier said than done, but the risks of not changing our financial ways are significant for individuals and the country.

Better financial health boils down to doing five things:

• Spend less than you earn
• Save regularly
• Insure yourself against high-cost or unexpected events
• Pay off property as soon as you can
• Invest for the future and retirement

Discovery Bank’s 2018 research into why people are typically not able to meet financial obligations shows that these five specific behaviours, if left unmanaged, are linked to 80% of financial defaults.

“Without adopting these behaviours, we can expect even higher levels of unaffordable debt and exposure to loss of income or unplanned expenses that are financially draining. In the long term, more people will not have enough income in retirement,” Kallner says.

How much you earn does not determine your financial health

Financial health is far less about how much a person earns than about what they do with their money.

Kallner explains: “Earning a high income does not necessarily equate to being financially resilient or financially free. It’s about being aware of how your actions can affect your financial health down the line. Discovery Bank’s research confirms that lower-income earners who control their financial behaviour typically have better financial health than people who earn more but have poor financial behaviours.”

This is evident in how people manage debt.

Discovery Bank’s research found that 35.9% of people with an income between R500,000 and R1 million a year have missed repayments on their credit facilities, while 9.1% have missed three or more consecutive repayments. These figures are only marginally better than for those earning less than R250,000 a year – with 37.7% missing repayments and 13.1% missing three or more repayments in a row.

Solutions for a stronger financial future

There is a definite link between financial knowledge and financial health. In an international survey on financial literacy, South Africans ranked the lowest out of 20 countries.

Kallner says: “With a better understanding of financial services and products, people are more in control of their finances. Those who are in the habit of saving regularly at the start of every month have emergency savings and can cope with unforeseen life events. Similarly, those who follow a budget have more money left in a month.”

The more you understand about working with money, the better your financial decisions, including managing debt and retirement planning. To encourage the five positive financial behaviours, Discovery Bank applies Vitality’s learnings that change health behaviour (exercising more, eating better and health screening) through Vitality Money.

Vitality Money forms an integral part of the Discovery Bank product offering. It nudges people with personal goals to save, to control debt, and to find ways to invest. All the financial education tools and rewards are ultimately there to help clients manage their money better.

“We know changing behaviour can be a challenge. With Vitality Money, people develop a greater understanding of how financial behaviour today can impact them in future. The rewards of better money habits are immediate with Discovery Miles, personalised interest rates and more.

“Over time, behaviours like saving, investing, and insuring against unexpected events all add up to a healthier financial future,” concludes Kallner.

Check how healthy your financial behaviour is with the Vitality Money status calculator. It takes a few minutes of your time to learn about your finances across the five behaviours that determine your financial health. Know how to change it and take control of your finances today – Discovery Bank can show you how.

The Vitality Money Calculator is for information only and does not constitute financial advice. Please consult your financial adviser before making any financial decisions.