16% of SA’s population under 35 have funeral cover, but half of them don’t know what a unit trust is, a study on ‘millennials and their money’ has found.
Irrelevant financial products like insurance are aggressively pushed on young people, crowding out investment products.
South Africans under 35 tend to be educated, tech-savvy, and optimistic. Yet 47% of this group has no idea what a unit trust is, according to a study by Old Mutual.
At the same time, although their risk of death is relatively low, 16% of the same group hold funeral insurance policies.
South Africans under 35 make up 7.1 million of the country’s workforce. Those who engage in credit-related activity end up on databases targeted by service providers targeting the middle and lower-income segments. The funeral insurance industry is among the most aggressive of those.
“Financial service providers actually start pouncing on the youth with financial products in their final years of study because they know that they can repay them soon after entering the labour market, says Visoni Luneta, a young participant in the study.
Only one in four South Africans under 35 have a unit trust. The remainder tend to save for specific purposes rather than invest: 37% are saving towards a holiday, 32% towards a car, and only 31% towards retirement.
‘Financial and investment firms also need to reconsider how they sell long-term investment products to young economic participants,” says personal finance coach Mapalo Makhu of the firm Woman & Finance.
Firms should listen more to the needs of young potential clients and come up with an investment vehicle that is better suited to them instead of rushing to close deals by making them sign up for futile and arbitrary products, she says.