Students in South Africa prove to be savvy spenders.
During the work week, Wits student, Robert Young, leaps out of his bed and stumbles to his desk, hitting cancel before the sound of his 4:30am alarm wakes up his entire family. About an hour later, the 24-year-old climbs into the car his parents let him borrow and makes his way to a local radio station, where he presents the 6:30am sports bulletin on week day mornings.
Once the sun has finally come up and the rest of Johannesburg has awoken, Young bids farewell to his colleagues at the station and makes his way to Wits University, where he starts his academic day attending lectures or studying in the library. Young is one of many students holding jobs as students to pay the bills or have a disposable income.
A survey conducted by marketing company Student Village over the last two years shows that young people in South Africa have significant spending power. Marc Kornberger, CEO of Student Village said that young people also exceed the spending power of the average South African — spending R32-billion per annum. Young says he manages to save around R1 000 every month, despite financing his own petrol, entertainment and a portion of his groceries.
In addition to their spending power, the 2019 Student Village survey of more than 3 000 students countrywide, also found that with an average monthly budget of around R3 000, two in every 10 students save a surprising 40-60% of their monthly income (around R1 500) and four more put away 20-40% of their money (around R1 000).
“I personally believe that being able to spend within your limits and being able to save are two of the greatest achievements for any student,” said University of Free State lecturer and expert in poverty alleviation, Dr Makeresemese Rosy Qhosola.
“Especially considering the fact that the majority of our students are coming from marginalised backgrounds,” Qhosola said.
Medical student, Rebecca Nielson, explained, “This year has seen my family overcome some severe financial stresses, with both my brother and I still living at home and res fees being unaffordable, living expenses, together with our university tuition fees, have become almost unbearable (for my parents).”
Nielson added that things have improved slightly since she and her brother received funding from NSFAS, but she still saves about R2 000 of her money earned through tutoring “in case (her) family or friends need something but cannot afford it”.
Qhosola said that an attitude to finances like Nielson’s “will definitely have a positive effect because students will earn interest through saving, [which means that] they will buy less on credit”.
Earlier this year, FNB’s CEO Doret Jooste told Business Tech, “Over the last year, our stats show that more than half of middle income consumers spend their income in less than five days.
“If you are not intentionally saving for something special, chances are that that money will be spent,” Jooste said.
These sentiments were echoed by Qhosola, who explained “that some middle-income South Africans use as much as a quarter of their monthly income to pay interest on debt”.
When asked how students should budget, Qhosola recommended the so-called “Elizabeth Warren budget rule of 50/30/20”. Fifty percent of monthly earnings is allocated to things that are necessary for survival, such as mortgage and car payments, utilities, groceries, insurance and health care. A further 30% is allocated to less essential items, such as entertainment, vacations and materialistic luxuries. The remaining 20% should be saved in case of emergencies or paying off debt sooner so as to avoid additional interest.
Students who spoke to Wits Vuvuzela seem to be a better position for savings as many said they were still living with family or had their needs taken care of by their families.
“I mainly have savings for setting myself up in the future,” said Molebogeng Nyako, a Wits medical student, who saves around 20% of her R2 800 budget every month. “I’m luckily still at home, so I don’t have to pay for rent and groceries,” added the 22-year-old.
Wits BA general student, Alicia du Plessis, echoed these sentiments, saying, “My parents take care of most (of my expenses). All I have to worry about are my hobbies and entertainment.”
Similarly, Young spends about R500 of his R3 000 monthly budget on entertainment and savings, while the rest of his money goes towards paying for petrol and certain groceries. But thanks to his weekend job as an announcer at Pick ‘n Pay, Young is still able to put away one third of his money (R1 000), which he hopes to use as a down-payment for a motorbike or to help him move out of home.
Nielson, on the other hand, anticipates having little dispensable income should she be expected to pay back her NSFAS bursary once she acquires her first job, as students who received bursaries prior to 2019 had to do. Having only been granted a NSFAS bursary in 2019, Nielson and her brother are not expected to repay the money allowing her to save her disposable income in the forseeable future.
FEATURED IMAGE: Lecturer and expert in poverty alleviation, Dr Makeresemese Rosy Qhosola, recommends the Elizabeth Warren budget rule of 50/30/20. Photo: Stephanie Schaffrath