CLASS AND RACE CAN IMPAIR FINANCIAL LITERACY
Areport commissioned by the Financial Services Board (FSB) has revealed that black and coloured people are lagging behind in financial literacy and pay little regard to personal finance and household budget controls. White, Indian and Asian people are the most financially literate, according to the report.
It also showed economic status as the ultimate influencer of financial literacy, while young people know their way around finances better than older folks.
The Financial Literacy Report, conducted by the Human Sciences Research Council and presented by Benjamin Roberts during the Sowetan Dialogues event, is part of the FSB’s SA Social Attitudes Survey, which measures South Africans’ attitude towards their finances.
With almost 3 000 people surveyed, the report also indicated that, since 2011, more citizens are controlling their finances, but fewer and fewer are planning ahead.
More South Africans are taking loans from both formal and informal credit providers – even on paydays – as a coping strategy, while fewer people are saving, except through informal savings clubs such as stokvels, the trends for the past six years show.
More than half of the people who know about savings accounts have them, but only 2% of South Africans have home loans from banks, unit trusts, stock exchange shares and loan protection insurance, while only 11% of the population polled has a pension fund.
“The research shows that white, Indian and Asian adults have significantly higher levels of financial literacy than black African and coloured adults. This is largely attributable to the intersection between race and class in South Africa, with white and Indian adults generally tending to be wealthier and better educated,” Roberts said.
He added that the pattern applied to the four domains of the survey, which are financial control, financial planning, appropriate product choice and financial knowledge; all four cover a total of 33 indicators.
The report also indicated that the poor levels of financial literacy have resulted in poor choices of financial products. Across all indicators, it shows a clear class and human-capital bias. No gender bias was evident, therefore showing that men and women adapt equally; however, overall, younger South Africans seem to be more financially literate than older generations.
Roberts presented the report shortly before a panel discussion that included representatives of the National Credit Regulator and National Treasury.
Roberts said the study was important for policymaking and though salient sociodemographic differences were identified, the most robust predictor of financial literacy was still economic status.