How are under-35s spending today?

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SIMON BROWN: I’m chatting with Tshiamo Molanda, Head Youth and Mass Market Segments at Standard Bank. Tshiamo, appreciate the early morning time. Your youth barometer out earlier in the week – youth, those under 35, looking at how they’re spending.

Let’s start off with a big sort of broad stroke, which is essential versus discretionary. My sense would be they are probably, as they’re younger, spending more on essentials. And then as we sort of age up and get a little older, we can move more to discretionary. Is that what your data is finding?

TSHIAMO MOLANDA: Simon, that’s exactly it. So what we’re seeing is that if you’re looking at the youth around the age of 18 to 24, a lot of their money is going to what are essentials. You could say almost 60% of their spending goes towards their essentials. And as they get older, you start more of a balanced kind of spend between essentials and your lifestyle.

SIMON BROWN: That’s just, I suppose, as their salaries increase, their careers grow. Liberty is obviously part of the broader Standard Bank group. They were part of this barometer. Are we seeing the youth investing or are they saving?

I remember being young and there was lots of pressure on my money, and it was truthfully hard to put some away for that long-term saving. Are we seeing it happen now?

TSHIAMO MOLANDA: We are seeing two things. The first thing that we’re seeing, if you are talking about type of savings, type of behaviour, where kind of like your smaller type of committed.. If you think about type of savings, type of behaviour coming, but also seeing your tax free savings account become very popular for these – and it obviously make sense, because I don’t want to be paying tax. I want to do as much as possible to make sure that whatever I’m saving comes to me and I’m able to earn that interest.

What’s another thing that’s been quite interesting and for me a surprise, to be honest, is that you start seeing funeral cover coming through quite a bit for the young crowd. I’ve always been a believer that young people don’t put anything towards funeral cover or anything like that, but actually the data is telling us otherwise.

SIMON BROWN: Okay, that is interesting. I wouldn’t have expected that. Credit cards? Credit cards easy to get. They can become quite dangerous, but what the data is showing is there is a high utilisation rate, but they are making frequent payments.

TSHIAMO MOLANDA: What I’m seeing from our own data, I don’t think it’s that big yet in terms of our credit card take-up and usage, it’s only about 16% that we’re seeing in terms of people under the age of 36 taking up credit cards. What we’ve seen, though, is that there is a shift in terms of kind of your entry level credit card, which is like a Gold and moving towards your Titanium, which is more like a premium credit card.

We do see credit kind of purchases, but frequent payments, as well. The great thing is that there are two things that I think we are getting. Firstly, the youth are becoming smart in terms of interest rates, and then, secondly, they’re using kind of your rewards programmes so that they can add additional income.

SIMON BROWN: Okay. And the rewards programmes definitely do work. Let’s go to the big one here, which is the home loans, and data from Standard Bank Home [shows] 40% of applications were from those under 35. The rand values might be a little smaller than [for] older [people] but the youth are out there and they are buying their homes – in most cases I imagine it’s their first home – but they absolutely are.

TSHIAMO MOLANDA: Yes, 100%. So 40% –that is the walk through, like through the door. Applications [among] the under-35s are smaller, as you rightly say. So we’re seeing on average about 1.2, 1.3… amounts are coming through. Mostly 100%, because obviously people don’t have the deposit or the small deposit.

But I think, unlike what we’re seeing in kind of some of the European countries, we are seeing a growing trend of our youth buying homes, especially for first-home buying. And that data is no different to what we’re seeing if you look at the likes of ooba and …. in terms of what they’re reporting.

SIMON BROWN: And vehicle finance? Obviously in many cases they are buying cars. Are they’re buying new cars or they’re buying second-hand cars?

TSHIAMO MOLANDA: This one was a surprise to me in two ways. I had suspected that the youth were buying lots of new cars. I also suspected that because of [car] subscription services you’d see kind of your car ownership going down – and we’re seeing actually the opposite. So we’re seeing a lot of second-hand cars coming through. Toyota, VWs – a big surprise. Also like a Chery. And then evidently they are buying cars. And there’s a core use between [car] subscription services and vehicle asset finance as well.

SIMON BROWN: My sense, reading the report, chatting with you now, is that I think a lot of folks out there would think, you know what, I remember my youth. I was not particularly responsible with money, if I’m perfectly honest. Reading this report, I get a sense that the under-35s are being responsible. They’re being smart about it. They’re buying second-hand in many cases. They’re using loyalty programmes and the like. They really are – and it’s tough – but they’re being responsible. But they’re being smart in tough conditions.

TSHIAMO MOLANDA: 100%. So yes, it’s the high cost of living, debt exposure, et cetera. But even though they’re under pressure, they’re making quite intentional and informed decisions. And the data also supports others.

SIMON BROWN: We’ll leave it there. Tshiamo Molanda, Head Youth and Mass Market Segments at Standard Bank, appreciate the early morning time.

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