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They are your older millennials, leaving home for the first time and feeling the brunt of the tough economic climate. The latest term coined to describe them is RIFS - recently independent, financially strapped individuals.
Unpacking some of the recent findings of the latest Old Mutual Savings and Investment Monitor, Old Mutual Personal Finance legal adviser Tristan Naidoo said that 17% of RIFS still rely on their parents financially, while 50% of them still "kind of boomerang in and out of the parental homestead".
What stands out for him is that independence is key for RIFS. "With that comes this immense responsibility they have around money matters. If you converse with anybody that falls into this category, you’ll soon see that the word planning features quite prominently."
Naidoo said it is this positive, responsible attitude that is helping the general South African shift away from a poisonous, impulsive habit to a more cautious, methodical spending approach.
Of the other OMSIM findings include that one in three RIFS hold down more than one job to try and boost their income. Furthermore, four to five of them share accommodation to help with the load of accommodation expenses.
WATCH: Tristan Naidoo unpacks the challenges RIFS face and their savings habits
Full transcription of the interview with Fin24's Moeshfieka Botha
MB: What are RIFS?
TN: RIFS are recently independent, but financially strapped individuals. These individuals are your older type millennials, and they are placed into this category as a result of them leaving home at a time when the economic climate is quite tough. They are your older millennials and their average age is 29. Their earning capacity averages R19 000 per month.
The stats have revealed that 72% of RIFS have at least some sort of post matric qualification. Furthermore, 88% of them own their own vehicle.
MB: This does seem to point to a level of stability.
TN: When it comes to stability and financial independence, the stats have also revealed that 17% of them still rely on their parents financially –and that 50% of them kind of boomerang in and out of the parental homestead. That’s probably as a result of them trying to feel out independence for the first time and realising that the climate out there is quite tough. They then have to move back in, just to feel their way around.
We have also found that one in three RIFS hold down more than one job to try and boost their income. Furthermore, four to five of them share accommodation to help with the load of accommodation expenses.
MB: With regards to accommodation, research shows that 57% of RIFS own their own property, with 44% owning solely in their name, of this 80% have bought their home with the help of a home loan. This points to how important access to credit is, specifically for RIFS. It also points to how important savings is to these RIFS, because with a home loan one often needs quite a large deposit, so it is very important to be saving. Do you find that RIFS are good at saving?
TN: The habits we’ve identified is that 63% of RIFS have indicated that they are actively saving and investing.
MB: Ten to fifteen years ago, that was not what we were seeing?
TN: There has been a complete mindshift. The results show that there has been such a massive departure from what we know of the younger generation. It was also encouraging to see that they have prioritised longer term planning. More than half of them are investing into banked cash savings or retirement annuities, which is your longer term savings.
MB: So what we are saying, is that RIFS are actually saving to invest?
TN: The survey results also show that one out of five RIFS are investing in unit trusts and shares. These are slightly more complex, but RIFS are willing to venture into the market and explore the savings culture. Every type of saving is important, and it was very encouraging to see that they are actually prioritising saving and seeing the importance that it has on their overall financial well-being.
MB:Statisics show that 31% are saving for unforeseen circumstances and expenses. That’s a definite mindset change from 10-15 years ago.
TN: That is a complete shift in culture. Some of the other stats also show that they are saving for a rainy day. That is risk mitigation 101 right there. This is not something that was drilled into them. This is just a habit and a culture that they have developed over time, and it is extremely pleasing.
MB: We have been striving to get to a culture of saving in South Africa for a very long time. Are we getting there?
TN: Yes, we are. Statistics reveal that RIFS are also saving to purchase immovable property, and as a result of that there is also going to be some sort of reliance on access to credit. I would encourage RIFS to keep to the basics when it comes to credit. Know what your credit record is and make sure that you maintain a healthy credit score. That credit score will make future access to credit easier.
MB: Have you been able to see what the top expenses are for RIFS?
TN: In terms of the general patterns that we have identified, the one thing that jumps out at you immediately, is that for RIFS independence is key. With that comes this immense responsibility they have around money matters. If you converse with anybody that falls into this category, you’ll soon see that the word planning features quite prominently. It is this positive, responsible attitude that they have, that is actually helping the general South African shift away from that poisonous, impulsive habit to a more cautious, methodical spending approach.
MB: The biggest challenges RIFS face is keeping up with the costs when they move out, and they often have more than one job. How would you advise RIFS to better plan for that stage of their lives?
TN: RIFS feel the pinch like any other consumer. Their biggest expenses over their spending profile are their necessities like medical aid, car insurance and groceries. Unsurprisingly the biggest cost that they are struggling with is fuel and transport. Notwithstanding their already good habits, there is no harm in improving their financial savviness and using on-line money platforms like Old Mutual’s Moneyversity, as this helps them to identify those sound financial management components, such as drawing up a budget.
Mobile apps such as 22seven is such a fantastic tool when it comes to drawing up a budget and managing finances, as it actually helps them to track their expenses and pick up those gaps and any other opportunities they can identify to eradicate unnecessary expenditure.
MB: Any closing suggestions for RIFS in terms of financial planning?
TN: I cannot stress the importance of a financial planner. The financial planner will help them to look at their savings and their habits and help them apply them from a holistic point of view. The financial planner has all the tools and is equipped to guide the RIF out of those climatic waters and bring them safely over to the other side.
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