There is a considerable opportunity to improve South Africans’ financial behaviour and health. Research shows that we are uniquely inept at saving (too little) and borrowing (too much) — leaving us overindebted and dangerously exposed in both the short and long term. The challenge is that changing behaviour at the individual level is extremely difficult.
As humans, we have biases that conspire against our frequent good choices. Owing to our over-optimism and propensity to discount the future for the present, we are bad at making good long-term financial and health decisions in the present. Instant gratification (eating that slice of cake, buying that unnecessary item) and misplaced optimism (it probably won’t happen to me) mean prudent choices aren’t necessarily easier choices.
Discovery’s research shows this conclusively and pervasively: we think we are in better health than we are; we assume we are better drivers than we are; and 64% of our surveyed members who are in poor financial health rated their financial position as good, very good or excellent. These biases matter because they manifest as cognitive flaws that undermine our financial preparedness.
South Africans borrow more than we should, and at a rate above the global adult borrowing average. In fact, despite its lack of affordability, credit use is outpacing employment growth in the country.
When secured debt is used to purchase assets like homes and cars, the use of debt is rational, assuming…