1 October 2014
The Life Surprises survey from Sanlam found the ‘surprises’ which most severely impacted respondents financially were the loss of savings, retrenchment and business closure. Whereas the ‘surprises’ with the biggest emotional impact were loss of savings, death in the family and non-vehicle accidents. It also found that most people were underprepared to deal with these surprises.
Regrets featured strongly among the surveyed age group, with 82.3% wishing they’d done more to prepare financially during their lives and 74.3% stating they would change their financial preparations. On a positive note, life surprises that had delighted respondents included an unexpected inheritance, a gifted child and landing a dream job.
As part of the project, respondents were asked to write a letter to themselves at the age of 20. Starting to save early featured most frequently in the letters. Advice to their younger selves included:
The survey – commissioned by financial services provider Sanlam and conducted among 600 South Africans aged 50 and up – aimed to draw on the wisdom of the more mature portion of our population. Karin Muller, head of Growth Market Solutions at Sanlam, says: “We are hoping that the lessons from the older members of our society will inspire more people to get organised and plan for life’s unexpected events.”
The extent to which financial knocks are also emotional knocks was the most eye-opening finding in the research, according to Muller. “We did not anticipate that loss of savings, loss of income, retrenchment or business closure would feature so highly on the emotional poll. The loss of savings or pensions savings, which had the highest financial impact, was also ranked to have the biggest emotional impact.”
She said that, while these big financial events will always be financially devastating, there are steps that can be taken to prepare for them, so the overall impact can be lessened. “Having an emergency fund equal to between three and six months of your monthly salary, a robust financial plan, appropriate insurance (risk cover) and an up-to-date will are good places to start when planning proactively for life surprises.”
The survey also found that a very high number of South Africans aged 50 and older were unexpectedly having to support others. Four in 10 of those surveyed (40.5%) had to provide for loved ones who they had not anticipated would become their responsibility. Muller says a good starting point is for families to have the difficult conversations about financial planning. “This will never be easy, as it does not come naturally to many families to talk about money, but being direct and working with a professional planner can help families have a better outcome in these situations.”
Seven out of 10 people surveyed obtained no financial advice (21%) or turned to sources other than professional financial planners for their financial advice (the largest alternate group being friends and family), with only 31.7% using a professional to plan their financial future. Muller says this is in line with human nature which often sees us listening to our peers over all others. “The role of the financial professional is being underused, perhaps because people underestimate the skill and expertise required to plan finances effectively. All financial advisers in South Africa must now hold a formal qualification which equips them to take a complete view of a person’s short, medium and long-term financial outlook to allow for strong financial preparedness. Of course a financial adviser can only do so much, as each person needs to be in the driver’s seat of their own life.”
Other findings were that 28.2% of respondents expected to outlive their partner, with 51.1% of these expecting to outlive them by a minimum of five years. Muller says outliving a partner carries with it a big financial burden and should from a key part of every financial planning exercise from both partners’ perspectives.
Survey respondents were asked to write a note to their 20-year-old self, and this is what a few had to say: