South African Financial Literacy is on the Rise
In recent years, the level of financial literacy in South Africa has been a major cause for concern. In 2016, a poll by the Organisation for Economic Co-operation and Development (OECD) ranked South Africa last of 30 countries drawn from Africa, Asia, Europe, Australia, North America and South America when it came to the financial knowledge of its consumers. However, now levels of financial literacy in South Africa finally look like they’re on the rise.
South Africa on a par with developed countries
The latest Momentum Financial Wellness study of 2,500 South African households and more than 10,000 individuals has found South Africa’s financial literacy levels are at 51 percent. That’s higher than many contemporary developing nations and even on a par with a number of developed countries.
Although levels of personal indebtedness in South Africa are high, it is thought that the regular use of credit means many consumers are effectively learning ‘on the job’ and are starting to have a clearer understanding of the costs of consumer credit. However, the bigger house, bigger car lifestyle is still very much present in South Africa, and until more householders start to understand the importance of planning, budgeting and saving, then levels of indebtedness will continue to be high.
Financial literacy is still a mixed bag
Despite the improvements that have been made over the last couple of years, there is still plenty of room for financial literacy levels to grow. On the positive side, the latest poll found that South African consumers have a respectable level of financial control, with many able to budget effectively and make ends meet. South Africans are also not inherently lax with their money, particularly older, better educated and more affluent people.
On the downside, South African consumers’ ability to save is one of their biggest flaws. The latest poll found that a little over a quarter of South Africans have funds set aside for emergencies, while less than half had saved anything at all over the last 12 months.
There’s also a declining proportion of South African households that are engaging in long-term financial planning. While many of the behaviours are limited to particular demographic groups, this is evident across the entire population, regardless of employment status, wealth and age.
How can financial literacy levels improve?
Financial literacy levels might be on the up, but there is still a way to go to reduce the abuse of credit and the inappropriate use of financial services. Thankfully, the increasing number of South African households with internet access means an abundance of free online resources are now just a couple of clicks away.
Wonga SA recently put together a list of some free resources that can change the way South African households manage their money in 2018. While this is an excellent starting point, there are also plenty of other resources that provide impartial advice and explain the fundamentals of sound financial management.
What are your go-to financial planning resources? Please share your favourites with our readers in the comments section below.