In the contemporary era, financial literacy plays an essential role in achieving economic success. A recent investigation by Nedbank reveals a promising trend: South Africa’s younger generation demonstrates a rising dedication to saving. However, a critical need remains for enhanced financial education and transparent guidance to enable them to fulfill their financial ambitions.
Nedbank’s Executive of Financial Management, Vanesha Palani, reports, “Our research shows a substantial 68% of young adults are consistently saving monthly, complemented by an additional 7% who are saving weekly.” However, Palani also points out that 78% of survey respondents craved a more profound understanding of effective ways to expand their wealth.
According to Palani, the guidance requested explicitly by participants spans a wide range of needs. However, most young savers seek clarity on investment returns and costs, customized advice, and in-depth knowledge of various savings products and how they work.
The urgency to fulfill these informational demands is palpable. “Given that our young adults are actively seeking more information and transparency to make informed savings decisions, we must deliver it,” asserts Palani. “This is the first step towards cultivating a robust savings culture that has been absent in South African society for too long.”
The study further underscores this point, showing 90% of young South African adults choosing savings accounts, indicating a healthy attitude towards saving among the youth. Additionally, 89% of survey participants engage in some form of informal savings strategy, like grocery vouchers, end-of-year expense stamps, stokvel participation, home cash storage, or keeping funds in a transactional bank account.
Many young individuals in the Nedbank study adopt a remarkably conservative approach to savings and investment. However, a noticeable sense of adventure distinguishes them from older saver generations. Palani points out, “Around 75% of participants are favoring direct investments over safer alternatives like unit trusts,” adding that cryptocurrencies, assets for resale, rental property, and independent share and forex trading constitute other popular investment channels.
Despite this promising focus on savings among the youth, Palani emphasizes the need for financial guidance. She noticed a heavy emphasis on short-term savings goals, with retirement planning or long-term investment receiving limited attention.
The study also identifies several hurdles to entry, including perceived low-interest rates provided by formal savings accounts, a lack of information about available products, and high costs.
The research highlights that factors such as savings reward points, customized savings and investment advice, banking fee discounts, and goal-oriented apps and tools impact young people’s savings behaviors and their product and service provider choices. Notably, digital channels are popular savings and investment enablers among young adults, with 51% using apps and 16% employing electronic banking as their primary savings methods.
In response to these findings, Palani reaffirms Nedbank’s commitment to understanding South Africa’s youth’s needs, preferences, and challenges and providing customized solutions that prioritize savings. For example, she recommends Nedbank’s JustInvest, offering a low minimum deposit, 24-hour fund access, no monthly fees, and up to 8.75% returns.
Nedbank’s broad range of savings and investment solutions stand as a testament to this pledge, including their JustInvest product which requires a minimum deposit of R500, 24-hour fund access, zero monthly fees, and competitive returns of over 8.75%. Through these offerings,
Nedbank’s solutions assist in the development of financially literate young South Africans.