YOUNG people in South Africa are better at saving than previous generations, but they aren’t investing, a study by Old Mutual has revealed.
Young people, or Millennials — those typically aged between the ages 18 and 34 — were failing to invest for the long term, according to research by Old Mutual Unit Trusts.
The study looked at the financial behaviour of employed Millennials and found that, while seven out of 10 Millennials have a savings account, only four in 10 are investing in pension or provident funds. With life expectancy now at 114 years, according to research by Britannica, the failure to invest could potentially be catastrophic for young people in future.
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Almost 1 in 3 millennials say they prefer cash instruments for long-term investments—but the generation is least likely to earn interest on such savings.
Millennials think cash is the best long-term investment. Unsurprisingly, they’re not seeing good returns.
Almost 1 in 3 millennials said cash instruments, such as savings accounts and certificates of deposit, are the best place to invest money they won’t need for the next 10 years. That compares with only 21 percent of older generations—most of whom prefer the stock market—according to research released on Wednesday.
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Millennials are more likely to take out expensive travel and cellphone insurance than life assurance, but the single biggest risk they face is their inability to earn an income if they are disabled in an accident or contract a severe illness such as cancer.
A Discovery Life study estimates that of the 145000 graduates entering the job market at the end of this year, about 3900 will die, suffer a disability or contract a severe or critical illness before the age of 35.
According to the study, entitled “Millennials at Risk of Underinsurance”, people born between 1981 and 1996 collectively have a shortfall of R15-trillion in life cover.
Ironically, the cost of life, disability and severe illness cover is much cheaper than travel, cellphone and other forms of short-term insurance, according to the study.
For the young and restless
And the earlier you take out cover, the cheaper it is over time. For example, if you took out life assurance when you were 25, by the time you turned 30 you would be paying a premium of R270 per R100000 of cover.
But if you took out the same amount of cover for the first time at the age of 30, you will pay R310 per R100000 of life cover, says Gareth Friedlander, the head of research and development at Discovery Life.
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If there’s one form of insurance that single millennials should not do without, it’s income replacement cover, which pays a monthly income if you become disabled. And yet there is relatively low take-up of this type of insurance by this demographic.
Research shows that younger millennials who have entered the workforce but who have not yet started a family are prone to risky behaviour, such as binge drinking and late-night driving. But they appear not to recognise the importance of protection against permanent disability.
Proceed to Source : IOL
Less than half of millennials are saving for retirement through pension or provident funds, with shifting perceptions by younger investors offering both opportunities and difficulties for financial services companies, according to research conducted by Old Mutual Unit Trusts.
Old Mutual’s survey suggests millennials are saving but not investing, reflecting a trend analysts say is putting increasing pressure on the fees that asset managers are able to charge.
It may also prompt consolidation within the financial services sector.
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Millennials need to preserve their retirement savings when they change jobs, to accumulate enough money by the time they retire.
Millennials have low levels of long-term savings, on average, because they change jobs often and tend not to preserve their savings with each job change, according to a recent Sanlam survey to supplement its annual Benchmark Survey of employee benefits.
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South African Millennials are heavily indebted, says Elize Botha of Old Mutual Unit Trusts. Elize Botha, Managing Director, Old Mutual Unit Trusts, looks at how employed South African Millennials spend their money.
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South African millennials are more likely to seek financial independence and personal fulfilment when compared to older generations, according to Old Mutual
The survey was commissioned to better understand the financial behaviour of employed millennials when compared to older generations surveyed in the 2017 Old Mutual Saving and Investment Monitor.
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