How SA’s youth make and (should) spend their money

South Africa’s youth are grappling with deepening financial challenges, including crushing unemployment, limited asset ownership and mounting debt levels, making older people wonder how they make and spend their money.

Eighty20, a consumer analytics and research company, analysed people younger than 24, who make up 44.5% of the population. With nearly 30 million people under the age of 24, South Africa’s economic future hinges on whether this generation can break the cycle of financial exclusion that currently defines their prospects.

The research reveals that of the 6.7 million young people between the ages of 18 and 24, only a million are credit-active. However, among these credit users, nearly half have already defaulted on their loans.

With an average monthly income of R3 400 (less than half the national average of R7 000) and a youth unemployment rate of 62.4% according to Statistics SA, financial strain is widespread in this age group, Andrew Fulton, director at Eighty20, says.

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SA’s youth mainly use retail credit

Among the million credit-active youth, retail credit dominates, with 85% of the respondents holding store accounts. Personal unsecured loans follow at 17%, while 9% have credit cards. In addition, young people represent approximately 4% of South Africa’s total outstanding debt, carrying R10 billion in combined obligations.

However, Fulton points out that their credit performance is worse than the national average, with R1.1 billion, or 11% of their total debt, currently overdue. This elevated delinquency rate signals particular financial stress within this age segment, Fulton says.

MRF’s Marketing All Product Survey (MAPS) of 20 000 South Africans shows that the youth are more concerned about privacy when it comes to credit. They prefer that others do not know they are taking a personal loan and would rather take the loan from a financial institution rather than from friends or family.

South Africa faces a stark financial inclusion divide among young adults, Fulton says. “While people under 24 represent approximately 20% of new credit market entrants over the past three months, a few hundred thousand individuals, this figure masks a deeper problem that many young South Africans never enter the formal credit market at all.

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Exclusion among youth creates two distinct groups

Fulton says this exclusion creates two distinct groups: people who successfully access credit can join the formal financial system and participate in the economy, while many others remain locked out, classified as ‘thin file’ clients due to their lack of credit history.

“Without access to formal credit, these young South Africans are excluded from significant economic opportunities.”

A credit score serves as the gateway not only to lending products and favourable terms, but to essential services across multiple sectors. A healthy credit profile enables access to cellphone contracts, rental agreements and can even influence employment opportunities, Fulton says.

“Expanding credit access among young adults represents both individual economic empowerment and broader formal economy development.”

However, he says a further challenge lies in how people who do qualify for credit perform: approximately half of young borrowers default early in their credit journey, with most maintaining high-risk credit scores. “This pattern underscores the urgent need for enhanced financial education and for those in distress to get into debt counselling early.”

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Youth make money with side hustles

How do young people make their money to make ends meet? Enter the side hustle economy.

Fulton points out that youth unemployment is at crisis levels, with fewer young people in formal employment now than in 2008. Harambee, an NGO focused on youth employment solutions, reports in its quarterly Breaking Barriers analysis that of the one million young people entering South Africa’s labour market annually, only 40% find work in the short to medium term, while 30% find intermittent employment but remain mostly unemployed or outside education and training, 20% want to work but never find opportunities and 10% stop seeking work altogether.

In addition, for those who are employed, side hustles have become essential to make ends meet. BrandMapp, a survey of South Africans in households earning over R10 000 monthly, shows a notable shift: in 2021, 55% reported having no side activities that create extra income, but this dropped to 49% in their most recent survey.

The survey asks for details on these activities and the percentage of people who say they are running small businesses as a side hustle, or taking second jobs in their primary field has grown by 50%. This trend mirrors international patterns, with about 50% of millennials and 46% of Gen Z reporting side hustles.

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Kind of side hustles the youth choose

The nature of these side hustles varies by demographic. BrandMapp data shows that ‘home industry’ activities are more common among black married couples, while temporary and shift work in restaurants and bars is more prevalent among white South Africans.

Fulton says the intersection of limited formal employment, growing debt burdens and the rise of alternative income sources creates challenges as well as opportunities for South Africa’s young people.

“In the face of considerable financial headwinds, many young people are turning to side hustles as a means of creating opportunity in a tough economy, but with the right support structures and a focus on keeping their credit history clean, this generation has the potential to drive long-term, inclusive growth.”