| By Gareth Stokes |
| The report is based on an analysis of the bank’s client transaction data. “The December holiday period is known as a time of increased spending; so, it is no surprise that our clients, in general, spent an average of 15% more than in other months of the year,” said Hylton Kallner, CEO of Discovery Bank. The CEO revealed that 62% of clients spent more on outdoor activities in December 2024 compared to other months of the year; 51% spent more on movies, 32% more on children’s toys, 26% more on eating out and takeout; and 15% more on clothes. “It is fascinating to see the change in [spending] behaviour comparing categories like spend on alcohol in December compared to stationery, and how these patterns change come January, indicating a noticeable return to work and daily responsibilities as many people prepared for the upcoming year,” Kallner said. Based on its Vitality Travel statistics alone, the diversified financial services provider filled the equivalent of 900 Airbus 320s between 8 December 2024 and 14 January 2025. They reported 158000 seats booked by 79000 travellers with average ticket prices ranging from R2 400,00 for a one-way domestic flight between Cape Town and Johannesburg, and R23 900,00 for a return ticket from Johannesburg to London, UK. While advisers marvel at the depth of financial data available to the bank, climate activists will no doubt reach for their orange paint in protest over the carbon gas emission implications. The income less expenditure debate The Festive Spend Trend analysis offered some useful insights into client’s expenditure versus income. The bank notes that, “Around 42% of its clients maintain a surplus left over from their salaries each month; for those who fully spend their funds, it typically takes an average of 16 days to do so.” In December, the picture worsens, with only 36% of the bank’s clients spending less than their income, depleting their salary in around 13 days. This calculation was based on total outflows exceeding total inflows per client, per salary month. Unpacking consumer spending habits can be fun, and your writer enjoyed the visual representation of spending on alcohol versus stationery over the year-end. Discovery’s experimentation with rewards in return for sound money management always makes for a good read, and should be encouraged. However, for financial planners looking to guide their clients to risk-appropriate, long-term financial outcomes, these insights could be somewhat superficial. They need to look beyond their clients’ monthly expenditures to the behaviours that influence clients’ day-to-day financial decision making. One approach worth exploring is that advocated by Momentum Financial Planning, who have increasingly put the spotlight on understanding consumer habits. Head of Financial Planning and Advice at Momentum, Bertie Nel suggests that the way your clients manage their spending is more tied to personal financial habits than you might think. Why? To answer that, we need to unpack the famous Stanford marshmallow experiment, first conducted by psychologist Walter Mischel in the 1960s. On marshmallows and deferred gratification As Momentum’s Head of Behavioural Finance, Paul Nixon, explains: In this experiment, children were given the choice of one marshmallow immediately or two if they waited 15 minutes. Initial behaviours were noted, and follow-up studies conducted spanning decades thereafter. The findings were profound: children who resisted immediate gratification tended to perform better in school and achieved greater success later in life. Nixon believes that this concept of delayed gratification translates into financial decision-making for households too. Nixon’s research, combined with the insights from Momentum’s Money Attitudes Assessment (3MAA), identifies three traits that will influence your clients’ approaches to money including prudence; anxiety; and prestige. The first of these traits determines whether your client is more focused on future goals or prone to impulsive spending. “A high level of prudence often correlates with better financial planning and saving, making it easier to resist the urge to splurge on the holidays,” Momentum observed. Clients with high levels of financial anxiety may experience stress about their financial stability and, as a result, may make poor spending decisions during times of uncertainty. If your clients possess this trait, you might consider managing that anxiety through strategies like diversifying investments. It was not immediately clear how a diversified portfolio would translate to reduced spending, leading your writer to assume that diversification smooths out market returns, reducing anxiety and reducing the temptation to spend. You do not need a new car to succeed The prestige trait can drive people to overspend in pursuit of social recognition. Clients driven by prestige often see money as a status symbol, making them more likely to overspend on appearances. Recognising this trait is, therefore, key to avoiding financial stress caused by unnecessary spending. “Understanding your client’s money personality is so crucial these days, especially when it comes to [helping them to] manage their finances effectively,” Nel said. Financial planners can help their clients by making them more goal-oriented and guiding them on a journey to an improved understanding of their relationship with money. For example, individuals with high levels of anxiety about money may benefit from stress inoculation techniques or visualising the positive outcome of saving for future goals. Those who lean towards a higher level of prestige might focus on long-term happiness and security rather than short-term purchases to impress others. |
