A recent study found that close to 40% of people earning between R15 000 and R20 000 per month, would not be able to meet a financial emergency of R10 000.
"[This] shocked me... when we think about saving for emergencies, you need to set yourself a little pot or fund that has about 3 to 6 months of income to deal with any kind of emergency," says Jikku Joseph, MD of personal finance app 22seven.
He believes saving for a goal, including emergency savings, you need to be able to track your spending.
His app, which is free, found that the top five categories South Africans spend their money on, excluding home loans and rental, are consumption categories - groceries, eating out, entertainment, transport, fuel and cellphone expenses.
"So the key thing is first to see where all your money is going. Secondly, creating spare money that you can invest – and top it up to get to that magic number which is 3 to 6 months, or a minimum of R10 000."
Joseph likens 22seven to a "Google Maps for your money".
"When you open up Google Maps it will show exactly where you are relative to everything around you."
Fin24's Moeshfieka Botha finds out more in this wide-ranging interview with Joseph.
Full transcript: Fin24's Moeshfieka Botha speaks to Jikku Joseph, MD of 22seven.
MB: 22seven is a personal finance app from Old Mutual. Do you know how this app works? In studio, we have Jikku Joseph, the MD of 22seven. He will tell us a little bit more about its core functions.
JJ: The 22seven app is a personal finance app that’s been designed to help South Africans track how they are spending their money. The primary intention is to help South Africans make better decisions with their money going forward.
22seven is like Google Maps for your money. When you open up Google Maps it will show exactly where you are relative to everything around you.
MB: So with this app, you will know at any given time what your financial situation is?
JJ: It’s so important for you to know where you are today, to help you make the right decisions going forward. So what the 22seven app does is once you’ve linked your primary spending and income account – it shows you where your money is going, different categories of spend. What you can do, is to set yourself specific targets that allow you to redirect that money into the areas where you want them to go. Just like with Google Maps, you set a destination and you get turn by turn instruction to help you get there.
MB: According to the OMSIM (Old Mutual Savings and Investment Monitor), people are cutting down on luxuries and necessities. How does the 22seven app assist with tracking those expenses?
JJ: Most people get a shock when they use the app for the first time and have all their expenses categorised. For it is then that they see how much they are actually spending and what they are spending on. For example, you may think that you are only spending a few hundred rands on eating out, but it turns out that you are spending R1000, or R1 500 or more.
MB: Don’t you find that this comes from people dealing with money in their heads?
JJ: Human beings are very prone to this under- or over-exaggeration of various metrics. The beauty of the 22seven app, is that it tells you things as they exactly are, but it helps you to get to where you wish to be. You need to start with where you are today, in order to help you get to where you want to be.
MB: So your financial goals will be easier to reach with the assistance of this app?
JJ: We’ve just launched a feature on the app called goals, and the idea is to start with what the customers' needs are. As you start to save money, by making the right money decisions, you free up some money to start saving for your goals. We’ve launched in June and we’ve already started to see the 22seven app users starting to save for their live goals.
MB: The OMSIM research shows that all income groups would struggle with a financial emergency. How would the 22seven app assist in planning towards that?
JJ: It shocked me that the OMSIM showed that close to 40% of people earning between R15 000 and R20 000 per month, would not be able to meet a financial emergency of R10 000.
When we think about saving for emergencies, you need to set yourself a little pot or fund that has about 3 to 6 months of income to deal with any kind of emergency.
The 22seven app allows you to set a goal specifically for emergency savings. You set a target of how much you want to save for emergencies, and the app helps you track your progress towards saving for that goal. You can open it up without any paperwork and without speaking to a human being. It’s low-cost and it’s very easy to top-up and track access to your money when you need it.
So the key thing is first to see where all your money is going. Secondly, creating spare money that you can invest – and top it up to get to that magic number which is 3 to 6 months, or a minimum of R10 000.
MB: We are also seeing that the 22seven app can assist in creating a better savings culture within South Africa. Is there anything on the app which shows us what users are spending their money on?
JJ: The top five categories of spend, excluding home loans and rental, are consumption categories. It’s groceries, eating out, entertainment, transport, fuel and cellphone expenses are your top five.
MB: And this app will help you keep track of your expenses.
JJ: The app automatically categorises your expenses. You have this very smart engine, that links your primary banking account, your primary spending account, credit cards etc.
If you link your primary income account and your primary spending account together, you can actually see how that money within those two accounts are going to these different categories, because we automatically categorise the spend for you. Only then can you start to address whether you are spending too much on groceries or eating out and set yourself a realistic target to help yourself achieve this target.
One of the problems with setting a budget from scratch, [and] without this information... you can set yourself an unrealistic target.
MB: Many people set themselves up for failure and become disheartened by setting up unrealistic budgets. One needs to set up a budget which is realistic and true. How does this app connect budgeting and goal setting?
JJ: Budgeting is difficult, and can be disheartening and tedious. It’s like taking your vitamins and going to gym. We know that budgeting is good for you. We all know that we need to budget, but we don’t budget. The beauty of 22seven is that it takes the tediousness out of budgeting. You link your account once, and every month once you log in we pull your data and show you where your money is going.
If you do it manually, you are required to go into the bank, get your statements, use your calculator etc. The app does it all for you and takes all the tediousness out of budgeting.
The app is free and there is no reason why South Africans should not be using it.
MB: How do South Africans access this app?
JJ: If you are an Android user you can find it on the Play Store, if you are an iOS user you can find it on the App store and if you don’t have a phone you can go to the website www.22seven.com.
MB: It is important to note that there is no money linked to this app. It’s data. It’s information. So one does not have to be scared that someone is going to go hold of your cellphone, go into this app and withdraw all your money?
JJ: That is very important for users of 22seven to be aware of. When you are adding your banking credentials to the app, all we are collecting is information. Nobody, not even the user can make a financial transaction from your bank account. We use your same level of encryption that your bank account uses, so your data is encrypted. We are insured, so if anyone ever hacked into 22seven you would be insured against any loss of funds due to your accounts being linked to 22seven. I hope customers are assured that their data is safe, and all that they are getting more and more information that helps them make the correct money decisions on an on-going basis.
- It's National Savings Month. Do you have a successful savings plan or story to tell? Share it with us nowand help others to also become Savings Heroes. For more on savings, visit our special Savings Issue.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER