By: Hayley Parry
Financial illiteracy has been a problem in South Africa for many years, and if nothing is done, it will continue to be a burden for generations to come.
According to a baseline survey on financial literacy by the Financial Sector Conduct Authority (FSCA), in partnership with the Human Sciences Research Council (HSRC), 49% of South Africans are financially illiterate.
With high poverty rates and limited generational wealth creation, financial literacy is no longer a luxury, it's a necessity. It's time to empower ourselves and rewrite the financial future for all South Africans. By developing healthy money habits, educating ourselves on saving and financial goal setting and making informed financial decisions, we can empower ourselves to change the “generational curse”.
In South Africa, there has historically been a big focus on helping the youth get a good education so that they can (hopefully) get a good job and earn well as a result. The problem, however, is that no one stopped to teach them what to do with those salaries once they start earning them.
This is a massive problem that impacts not just individuals and households but has a broader impact on economic growth, rising debt levels and poor savings rates and cultures. It is therefore critical that we educate consumers on how to manage their money like a pro. This may start with financial literacy but, essentially, we need to aim for financial intelligence. This means it’s not just about understanding the basics; it’s about understanding how you can use your salary to change your future and build generational wealth.
The Financial Sector Conduct Authority’s studies have also shown that a third of South Africans have no retirement plan, which is a concerning stat, and while the government is trying to address this with the implementation of the two-pot retirement system, we must take personal accountability first and ask ourselves what, if anything, are we doing to prepare our finances for when we can no longer work? Of course, it's hard to think about putting money aside for the future when we’re not even sure how we’re going to make it to payday. This is why we recommend getting the basics right first.
What does this mean? Well for starters, get yourself a financial education (like the free online courses provided by The Truth About Money, for example) so that you can learn how to make a profit with your salary every month. Once you’ve got that sorted, then it’s time to figure out how you can increase that profit portion and start investing for your golden years.
It’s important that when we look at our personal finances, we look through the lens of those we love. What kind of legacy are we leaving behind for them? Is there a way we can reduce the burden on them or rather empower and educate them? This means looking not only at leaving them a financial or monetary legacy, but also the knowledge, skills and confidence around what to do with a life insurance payout or inheritance, for example.
Financial literacy should be for everyone – it is a powerful tool that can unlock a brighter future for ourselves and generations to come. Taking a stand now to educate ourselves on the right financial decisions, developing healthy money habits, and making informed decisions means we can create a future of financially savvy individuals – ready to build a foundation for financial security for the next generation.
* Parry is a money coach and facilitator at 1Life’s Truth About Money.
PERSONAL FINANCE