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A Success Story

Mind over money – The cost of debt on our mental health

Stressed young woman makes calculations on taxes to be paid

By Staff writer

Crippled by debt and struggling to make ends meet is a fair way to describe life for thousands of South Africans right now; consumer debt is now sitting at a staggering R1.5trillion, according to the latest data from Experian South Africa.

The fact that South Africans have a debt problem is nothing new. But it’s an increasing cause for concern as the situation has, and continues to be, exacerbated by a combination of slow economic growth, job losses, reduced salary scales and delayed TERS payments due to COVID-19.

Beyond the threat that debt poses to our financial security, it also takes an enormous toll on our mental wellbeing. Debt can trigger anxiety and depression, and induce feelings of hopelessness, desperation and defeat. In fact, a recent survey by policy institute Money and Mental Health found that 50% of people who are in debt suffer from poor mental health, making them vulnerable to further money-related stress. In addition, the South African Depression and Anxiety Group reports that 46% of South Africans say they are experiencing some form of financial stress and pressure since lockdown. 

Rejecting debt outright is ideal, but often not viable. “We’ve all had to resort to using credit when the washing machine gives up the ghost, or the stove is on its last legs. In situations like these, it is useful to consider alternatives to credit that are less expensive, more flexible, and which enable us to meet our short-term needs without incurring the burden of debt,” suggests Aimee Millers, Sales, Marketing and Customer Care Manager at Teljoy, South Africa’s foremost rent-to-own provider.

One alternative that’s already popular in more developed markets such as the US and UK is the concept of the rental economy. It’s a transactional system that prioritises access over ownership, and removes the risk and cost of debt from the equation. “The rental model offers customers the option of renting furniture, appliances and consumer electronics on a month-to-month contract, eliminating the debt burden of an upfront credit purchase. The stress factor is completely removed because there is no risk – the contract is flexible to match the changing needs and circumstances of the consumer,” Miller explains. 

Beyond how debt and financial stress makes us feel, it has a tangible effect on our ability to function optimally. Over-indebted employees struggling to meet their financial obligations are unlikely to be optimally productive. The global pandemic has resulted in  considerable financial strain on most households, which has in turn ratcheted up anxiety and stress. Now, more than ever, companies are – and should be – seeking ways to help improve the financial wellbeing of their staff – not only for their own bottom line, but because they have an ethical obligation to do so.

“There are several options available for employees trying to stay afloat during the month,  from unsecured loans to early access payday solutions. But for companies wanting to help employees make the best decision for their long-term financial wellbeing, it’s critical to consider options that don’t encourage additional debt,” Tamir Sacks, CEO of PayCurve, points out.

Echoing concerns about the impact of stress on work productivity, he adds that employees who are over-indebted are more likely to have to take time off work for medical treatment, or simply to do the necessary admin to tackle their financial issues. His company offers a fintech solution to South African business that allows them to offer their staff unfettered access to their salaries throughout the month – but with the essential safeguards and financial guidance that will help, not hinder, their path to getting back on track – and lower their stress levels.

“It is important that employees are able to handle their daily finances, and meet the demands of an unexpected expense, without getting themselves deeper into debt,” Sacks says. According to a 2019 study by TymeBank,  57% of South Africans run out of cash by the 15th of the month, and only 24% have enough money to get them through to the next payday. And that was pre-COVID-19.

“There are three factors to consider when it comes to financial wellbeing – an employee’s financial situation, their financial skill, and their financial literacy. If you can use a platform that addresses all three, the chance of an employee being unable to fulfil their contractual obligations because of debt-related stress, is significantly lower,” says Sacks. And, he adds, “In the current challenging economic environment, a company that is able to provide its staff with a holistic financial wellness solution that incorporates these factors, will undoubtedly have a competitive advantage as an employer.” 

PayCurve’s fintech solution to financial stress in the workplace is net-positive in every way. Using a number of data points, the platform carefully calculates the sum accessible to employees to protect their finances. “The only way to alleviate some of the stress associated with debt and financial shortfall is by offering ethical, responsible and affordable solutions that empower people to make the best decisions for their long-term financial and mental health,” Sacks comments. The fee to access PayCurve’s platform is comparable to at ATM withdrawal, making it accessible to anyone who needs it. 

Stress is an inevitable reality of modern-day life, but there are ways of mitigating the harmful potential impacts. And effective financial management is a crucial way to help address one of the most debilitating triggers of anxiety and depression.