South Africa ‘a nation of financial illiterates’

SAVINGS CULTURE: WE LACK KNOWLEDGE TO MAKE DECISIONS

There may be a difference between people’s attitudes and their actions.

Aconsiderable portion of South African adults may be inadequately equipped to make key financial decisions, a new financial literacy study has found.

While there was broad evidence that South Africans had a positive attitude towards saving, personal and macroeconomic realities often hindered their savings behaviour, Benjamin Roberts, senior research manager at the Human Sciences Research Council (HSRC), said.

Key highlights

Roberts was speaking at the release of key highlights from the financial literacy section of the 2015 South African Social Attitudes Survey at the Sowetan Dialogues. Conducted by the HSRC in November and December 2015 on behalf of the Financial Service Board (FSB), just shy of 3 000 respondents were interviewed.

It says the level of financial literacy among adult South Africans tends to be in the low to moderate range, with a score of 55 out of 100. The figure has remained fairly stable over time when compared to past iterations of the research.

Fifty-eight percent of respondents indicated that they had a household budget, while 81% said they had a considered approach to spending. Yet only 37% always paid their bills on time, suggesting that there may be a difference between respondents’ attitudes and their actions.

Alarmingly, 69% of respondents had no savings or emergency funds. Half were not saving and 40% had no retirement plan.

According to the FSB, low levels of financial literacy negatively affect consumers in numerous ways, including the incapability to assess the suitability of financial products for their personal needs.

“Financial illiteracy also undermines saving and makes individuals more vulnerable to lending and financial scams. The ability of an individual to start a business can be affected by financial knowledge, capability and understanding; therefore financial illiteracy undermines entrepreneurship in South Africa.

The study’s findings also underline that educated South Africans and those in higher income groups are far more likely to demonstrate sound financial knowledge and behaviour.

Caroline da Silva, deputy executive officer for Fais at the FSB, said the research once again sent a message that inequality was one of the biggest single risks and that the country needed to focus on transformation.

Mpho Ramapala, manager for education and communication at the National Credit Regulator, said the most vulnerable group of consumers were generally at the lower end of the market. “It’s because they don’t know their rights when it comes to credit.”

Pensioners were often targeted by informal lenders who kept their Sassa cards, ID documents and bankcards.

Assistance 'limited'

Nigel Willmott, financial planner and member of the Financial Planning Institute of Southern Africa, said a lot of the financial education interventions by the financial services industry were fairly limited and unsustainable.

There were also questions about the motive for the programme, which might be an effort to collect cell phone numbers and e-mail addresses to sell products.

The most vulnerable group of consumers were generally at the lower end of the market.

Mpho Ramapala Manager for education and communication at the National Credit Regulator