Good financial habits need to start at a young age
June is Youth Month, and part of building a successful society, is nurturing healthy money habits from a young age
When times are tough, as they currently are, South Africans need to practise sound financial planning to steer clear of bad debt and other financial burdens. And here’s the important bit: financial planning is not a skill that can be delayed until your mid-30s or 40s. It needs to be developed from a young age. The earlier individuals learn to make sound financial decisions, the better their quality of life will be, as they move through different life stages.
The challenge is that financial literacy in SA is among the lowest in the world. In a 2015 the Organisation for Economic Co-operation and Development’s (OECD) International Network on Financial Education “Survey of Adult Financial Literacy Competencies” that measured the financial literacy in 30 G20 countries, SA ranked last. And while, yes, this can be partly attributed to high levels of poverty, unemployment and inequality, the growth of middle-income earners in SA and the reduction in overall poverty have not remedied the situation. Inequalities continue to be passed from generation to generation with minimal change over time.
What we need to do is financially educate our children and our youth to turn generational baggage into generational progression. The role of financial knowledge in enhancing someone’s quality of life can’t be underestimated. Knowledge empowers people to make informed life decisions. Simply put, when you know better, you are equipped to do better.
No ‘one size fits all’
However, in a country with diverse levels of financial literacy there is no “one size fits all” model that can meet all our financial education and literacy needs.
A key opportunity here is to develop programmes and design initiatives that are relevant, comprehensive and targeted at specific groups. For example, the integration of financial education into the formal school curriculum should also be accelerated, while at the same time many more adult financial literacy programmes should be rolled out.
Improved trust in financial institutions through customer-focused regulation and practices now presents an opportunity to increase and enhance financial literacy initiatives. Providing greater access to financial services to low-income earners, who have traditionally felt excluded from such initiatives, is critical. The financial industry recognises more than ever that creating access to financial knowledge for as many South Africans as possible is a cornerstone of societal and economic growth.
Of course, while financial literacy is the responsibility of everyone, including parents, schools, the government and the private sector, it is ultimately up to each individual to create better outcomes for ourselves. The earlier we are able to internalise this message, the better.
Saving and investing is all about planning to achieve dreams and goals. Essentially, this is what financial literacy allows us to do: realise dreams and jump any hurdles on the way to them. The earlier you get started, the more realisable the dream.
• Naicker is the head of strategic retail marketing at Old Mutual personal finance.