Discovery Bank has done the research, and it boils down to this: If South Africans, as individuals and as a nation, want to move forward socio-economically - we desperately need to reduce our debt and foster a healthier savings culture. Here’s why.
If you borrowed money for any reason in 2017, you’re one of 53% of South Africans who did so last year, according to the World Bank’s 2017 Global Findex Report. Studies also show that credit use is outpacing employment growth.
There are now eight million more credit-active consumers than the total number of employed people in South Africa. And the problem is bigger than these figures reveal, because they don’t account for informal debt like private loans.
By and large, South Africans are big borrowers and poor savers
Research shows that, if faced with an unexpected expense of R10 000, more than half of South Africans would be forced to take out a personal loan‚ rely on credit facilities, or borrow from family or friends, while 30% are uncertain how they’d handle such an expense.
A combination of habits like reliance on credit and a disinclination for saving leaves people significantly exposed to financial crises in both the short and long term, putting us in a position that’s financially precarious, both individually and as a society. It’s no surprise then that these habits result in major socio-economic challenges to our personal and nation’s success.
5 behaviours can help people become financially healthier
The game-changer is realising that these challenges can, in large part, be addressed through simple behavioural changes at an individual level. In fact, getting people to make better financial decisions is rather similar to encouraging them to develop healthier lifestyles or more responsible driving, and similar behavioural models apply.
By changing just five controllable behaviours, people can materially improve their financial position and meet their financial obligations.
So how can South Africans become more money-savvy?
The solution? Understanding and addressing these five behaviours through Vitality Money, a behavioural change programme that aims to guide and incentivise financial resilience by rewarding healthy financial behaviour.
All Discovery Bank clients will have a Vitality Money status (ranging from Blue to Diamond), on which your interest rates for savings and loans will be based. You’ll then be incentivised to make savvy financial choices to help you move up the levels – which means your interest rates are dynamic, personalised to you, and you have direct and ongoing control over them, and can improve them through behaviour change.
Strong incentives to improve financial behaviour
Clients are rewarded with significant discounts at many of Discovery Vitality’s wide range of partners. For example, while Diamond Vitality members enjoy up to 35% off on flights from selected partners, Vitality Money clients can boost these discounts up to 75%. Discovery Bank is also partnering with iStore to offer iPhones to their clients: by achieving your Vitality Active Rewards money goals, you can fully fund a new iPhone (or, at least, fund it in part, depending how many monthly targets you hit).
All bank clients will also have access to a range of tools to help them manage their money better and become financially stronger, says Phuti Sebidi, Chief Client Officer at Discovery Bank. “These include a spend manager to help them budget smarter and manage their spend each month, a retirement planner, a financial education video series and access to discounted advanced education courses, debt tools and personalised goals – all of which will help our clients take steps that are best and tailored for each of them.”
It’s time for a banking model that’s good for everybody
Importantly, Sebidi says, Discovery’s banking model recognises that:
- Financial health is less about income level, and more about how individuals manage their money. In other words, high-earners aren’t necessarily any more responsible with their money than low-earners – and wherever you fall on the pay scale, you can improve your financial health.
- Financial awareness is key to better financial decision-making, but South Africans urgently need help in this important area (in an international survey of adult financial literacy competencies, South Africans ranked lowest out of 20 countries in terms of financial education).
- Initiating and sustaining a change in behaviour requires an understanding of how people think about and interact with their finances. This is especially the case as behavioural economics research shows that people are inherently optimistic about their financial health and prioritise immediate gratification, which means they save less and underestimate the probability of not being able to meet future financial obligations.
“We believe that a shared value banking model that incentivises people to make better financial decisions will generate higher savings levels, lower risk and increased wealth for society as a whole,” says Sebidi. “That’s why we’re committed to a banking model that’s not just good for the bank, but good for consumers as individuals, and good for our nation’s economy.”
Disclaimer: This article is meant only as information and should not be taken as financial advice. For tailored financial advice, please contact your financial adviser. Discovery Bank Limited is an authorised financial services and registered credit provider. Registration number 2015/408745/06.
It's finally time to bank healthier. Are you game?
We're taking on the challenge to help South Africans become financially healthier by launching the first behavioural bank in SA. Join a bank that helps you think differently about money, so you can achieve the kind of financial future you want. A healthy one.
Join a bank that’s good for everyone
Discovery’s model of shared-value banking encourages clients to improve their financial health, which helps them create wealth over the long term. Financially resilient clients mean a healthier society in general, one that has more disposable savings and wealth, with far less reliance on the state. Discovery Bank also grows with more clients and lower risks. What’s good for our clients, is good for society, and is good for us.
Start your journey to a healthier financial future. Learn more about Discovery Bank here.
A retirement savings strategy isn't static - it needs to adapt as you move through different life stages. In other words, a 25-year old will approach retirement investment differently to someone who is 55.