Navigating Income Volatility for Gig Workers

In recent times, more people are choosing freelance and flexible work. This shift, called the gig economy, is growing quickly around the world. According to Statista, Gig workers are expected to make over $455 billion in 2023 and they are a vital part of the local economy. However, they face a unique set of challenges. This Money Smart Week, Satrix aims to educate and empower gig workers to face these challenges with confidence.

Two of the challenges faced by Gig workers are traditional financial products and the need for solutions. Regular investment products, like retirement plans, are designed for people with stable jobs. They assume that workers can save a fixed amount every month. However, gig workers can find this difficult because their income changes from month to month. Research shows that many gig workers don't have savings for emergencies, so even  expenses, like fixing a car or paying rent, can be a big problem. There is a need for financial solutions that allow them to save money even when their income isn't consistent.

Here are Some Tips for Gig Workers to Manage their Money Better:

1. Emergency fund: Start by saving money for emergencies. This should be about six months' worth of your average income. It's important to have this safety net.
2. Build a savings portfolio: South African gig workers can choose from hundreds of collective investment schemes such as unit trusts and or exchange traded funds (ETFs), which allow them to build a savings portfolio with exposure to any asset class, both local and offshore.
3. Use Money Market funds: Although cash savings can be accumulated in a bank account, it makes sense for gig workers to consider money market funds that allow them to earn ‘better-than-bank’ interest rates while avoiding the price uncertainty that goes hand-in-hand with stock market investments. As the gig worker accumulates sufficient savings – and his or her earnings become more stable – the adviser may suggest lump sum or once-off investments in a range of discretionary investment products.
4. Retirement planning: Gig workers with variable income should not neglect saving for retirement. After building an adequate emergency fund, the gig worker can begin contributing to a retirement annuity offered by one of the country’s Linked Investment Service Providers (LISPs). Retirement annuity products are also available on the SatrixNOW investment platform. These retirement annuities are balanced funds and they allow flexibility in contributions, introducing gig workers to a highly regulated retirement funding industry.
5. Get professional advice: A financial adviser can help you manage your money, choose the right investments, and plan for the future. The gig economy carries significant risks and a high level of uncertainty. This uncertainty makes it difficult for gig workers to choose investment products for their emergency funds or to secure their retirement funding. Gig workers should approach financial advisers to assist in managing uncertain cashflows, and – over time – build the necessary exposure to savings, retirement funds and investments.

Click here for information on ETFs, unit trusts and retirement annuities with Satrix.

Disclosure

Satrix Investments (Pty) Ltd is an approved FSP in term of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision. Satrix Managers is a registered Manager in terms of the Collective Investment Schemes Control Act, 2002.

While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaims all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information. 

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