The latest 1Life survey reveals the tough economy has encouraged consumers to take generational wealth more seriously.
The 1Life Generational Wealth Survey shows that consumers are now starting to prioritise financial planning with over 90% of respondents indicating that they have looked at ways to save for tougher times through avenues such as insurance cover and investments, an increase of 12% on the previous year’s survey.
Now in its second year, the 1Life Generational Wealth Survey examines attitudes, beliefs, and efforts of South Africans towards creating and maintaining generational wealth and the ways in which they are gearing their lives towards creating it.
“For the longest time, many South Africans have believed that generational wealth is reserved for a privileged few. Having tracked this over the past two years through our survey, we are starting to see a considerable shift in this thinking. Compared to last year there has been a decrease in those using life insurance, family businesses and tertiary education as a route to generational wealth but a slight increase in money and assets (from 45% – 48%) as a key route,” says Brina Biggs, senior manager at 1Life Insurance.
“We have also seen a 5% increase – from 86% to 91% – in terms of those who say leaving generational wealth is important for them. While this shift seems less significant, even the slightest of changes can make a big difference and it is enlightening to see that this year, 75% of our survey respondents have put a plan in place to start creating wealth for their families since last year, with 62% of respondents indicating that they have made progress in creating generational wealth over the past year – despite economic turbulence.”
The survey results indicate a dramatic increase in the uptake of life insurance (from 41% to 70%), investment in property (25% to 40%) and increase in savings and investments (from 30% to 37%).
However, a slight decrease in focus placed on tertiary education and entrepreneurship.
“While not all respondents are saving in the traditional sense, it is encouraging to see through our results that people are making sure – now more than before – that they have some sort of start to building their wealth. Some have even opted for using 2-litre bottles as piggy banks, joining stokvels, as well as starting grocery schemes,” she said.
“We remain optimistic though because 13% of the respondents believe teaching their children good money management skills is an essential part of building family wealth. Similarly, 50% are teaching their children good money management. This is something we always advocate for, because generational wealth requires that the next generation knows how to make the wealth they inherit go further to the generation after them. Children should be taught financial skills early so they understand how to manage money, handle debt, and ultimately reach financial freedom.”
Over the past three years South Africa has experienced a significant increase in costs, with inflation reaching a 13-year high, increasing to 7.8% in July 2022, according to Statistics SA.
However, this economic instability has now emphasised the growing need for more financial security for so many.
“The impact of Covid-19 on finances still lingers for many consumers, not to mention the reality of how quickly things can change when we lose loved ones. For many South Africans this level of vulnerability has spurred them into looking for means to save for tougher times through avenues such as insurance cover and investments,” said Biggs.
1Life’s survey indicates that 88% of respondents have cut down on unnecessary spending, such as family leisure trips, eating out, and buying expensive clothes.
What is promising is that 49% stated that they are now actively saving for emergencies to secure their families financial future.
The study, however, reveals a drastic drop (27%) in people believing that life insurance is the easiest way to create wealth. Furthermore, only 30% of respondents see a life insurance policy as one of the best options available to build generational wealth.
“While it is good news that more consumers have become financially aware, we still believe that the financial services sector has a lot of work to do in terms of educating consumers about the various options available to them to help build generational wealth – through simple, calculated steps,” said Biggs.
“We undoubtedly have a long way to go in terms of educating consumers about generational wealth and changing perceptions about its attainability. However, the progress consumers have made over the past year in building generational wealth is indeed encouraging – especially given the tighter economic conditions. South Africans have not only become aware of the importance of building wealth but are now taking the necessary steps to achieve it and that is certainly a step in the right direction.”
BUSINESS REPORT