By Siyabulela Nomoyi
Satrix’s data shows that in 2022 and 2023, 57% of inflows to the SatrixNOW platform came from account holders under 40 (as of April 2024). This is extremely positive, suggesting younger generations are driving healthy investing habits. With increasing focus on financial literacy among younger people, it is an opportune moment to delve into how younger generations are redefining investment trends, their approach to financial independence, and their challenges.
Gen Z, especially, seems to be more financially optimistic than other generations. Answering this optimism with opportunity could be a game-changer for South Africa. If we can shift an entire generation’s saving and investing behaviour by laying solid foundations early on, this could start to change the country’s negative narrative around the chronic lack of household savings for the long term.
We can see young people have many healthy investing habits forming, however, there’s the need to make money ‘stickier’ so individuals invest for the long term and don’t draw on their savings and investments for short-term goals. Here are some of the saving and investing behaviours we’re witnessing in South Africa’s younger generations:
Financial independence and retirement planning
Young people are engaged and also proactive about their financial futures. Data from Satrix reveals that by April 2024, investors under 40 accounted for most of the SatrixNOW platform's investment accounts: 56% of Satrix Tax Free Savings accounts**, 48% of Satrix ZAR (or standard) accounts and 50% of the other accounts on the SatrixNOW platform belong to people under 40.
Additionally, and positively, they are forward-thinking regarding their retirement, holding 44% of the platform’s Retirement Annuity accounts. While some would expect the youth to be less proactive about retirement planning, this proactive stance is possibly fuelled by the rise of the gig economy and entrepreneurial ventures, fostering a mindset of financial self-reliance and a keen interest in fintech solutions.
Rising trend in investment accounts
Over the past three years, there has been a significant uptick in investment account registrations by under 40s on SatrixNOW. They accounted for 72% of new registrations in 2023 and 76% in 2022, with two-thirds of these being individuals under 30. The appeal lies in the simplicity and accessibility of investing apps, which offer low fees and no minimum investment amounts, making it easier for younger individuals to start their investment journeys.
Social influence and word of mouth
Social media and peer influence seem to play crucial roles in driving investment trends among young people. The fear of missing out (FOMO) and the influence of social media influencers discussing investments may be amplifying younger generations’ decisions to invest.
Satrix referral channels indicate that people under 40 make up 83% of registered accounts that found the online investing platform via ‘referrals’.
Challenges with long-term investment
Despite their enthusiasm, young people face challenges with maintaining long-term investments.
In 2022-2023, people under 40 made 57% of all deposits. Over the past three years 59% of this cohort made withdrawals. Encouragingly, however, they only accounted for 20% of total withdrawals made in rand terms. This may suggest a lack of “sticky money”, which means funds remain invested over the long term despite market fluctuations. Factors such as financial pressure, economic uncertainty, and short-term financial goals may contribute to this high withdrawal rate. There is a clear need for more education on risk tolerance and long-term investment benefits to address these challenges.
Investment optimism and openness to advice
The younger generation’s affinity for technology makes them optimistic and open to financial advice. They actively seek educational content through video channels, social media influencers, webinars, and podcasts that simplify investment concepts. This openness to learning and guidance can be harnessed by investment platforms to foster a deeper understanding of long-term investment strategies and risk management. We need to rally to better answer their call for understanding with omnichannel, accessible education.
The bigger picture: Financial inclusion and economic impact
Encouraging a robust and inclusive financial environment is crucial for fostering a financially responsible generation. The financial savviness of Millennials and Gen Z can help reduce economic disparities, particularly in a country like South Africa, which faces significant financial inequality.
Increased savings and investments among young people can boost capital availability in the stock market, fostering innovation in businesses and addressing social issues like high unemployment. Moreover, a well-informed younger generation can reduce reliance on government grants, contributing to a more stable and prosperous economy.
Millennials and Gen Z are at the forefront of a financial revolution, leveraging technology and digital platforms to navigate the investment landscape. While they show a strong inclination towards financial independence and innovative fintech solutions, challenges remain in fostering long-term investment habits. With targeted education and guidance, these generations can play a pivotal role in creating a more equitable and financially inclusive future.
The potential for Millennials and Gen Z to shape the financial world is immense, and their proactive engagement in investing is a promising step towards a more stable and prosperous economy.
* Nomoyi is the quantitative portfolio manager at Satrix.
PERSONAL FINANCE