Behaviour is the key to riches

NOUS: LITERACY IS NOT THE BIGGEST PROBLEM IN SA’S FINANCIAL WELLNESS, INDEX FINDS

In the last year there are 1% fewer households considered financially well.

While a nosediving economy has taken its toll on the financial wellness of SA households, financial literacy and financial education levels continue to play a significant role in the population’s financial stability.

More importantly, how you choose to use the information available to you dictates your financial standing.

The Momentum Unisa Household Financial Wellness Index released yesterday shows a change in behaviour is still the fundamental difference between the 25% classified as financially well and the 75% who aren’t.

Professor Bernadene de Clercq, head of personal finance research at Unisa, says the index advocates an improvement in financial education and financial literacy.

“We need to improve financial capabilities and provide an enabling environment,” she says.

These findings tie in with a research paper, Measuring and Profiling Financial Literacy in South Africa, published last year by the SA Journal of Economic and Management Sciences, which showed that although financial concepts or terms are well ingrained, positive financial behaviour is lacking.

Dr Elizabeth Nanziri, senior lecturer of development finance at the University of Stellenbosch’s Business School and co-author of Measuring and Profiling Financial Literacy in South Africa, notes that in the SA environment, the lack of transparency of financial institutions in terms of bank fees and charges deters potential users of financial products.

“Additionally, the existence of credit facilities can have the unintended consequence of [consumers] not saving regularly.”

Nanziri’s research also found lower-than-average levels of financial literacy evident among women, black South Africans, those with less than matric and those aged 18 to 29.

Her research supports the findings of the Momentum Unisa study showing that people receiving money from formal sources have higher financial literacy scores while recipients of grants and income from informal sources have below-average scores.

“This difference could be owing to formal employers requiring employees to use formal financial mechanisms ... which requires financial proficiency,” she says.

Over the last year, two factors improved – net asset wealth and education levels.

Statistics SA’s 2018 General Household Survey showed during 2018 about 45.2% of people 20 years and older had a matric/national senior certificate or higher qualification compared to 43.1% in 2017.

Chief marketing officer at Momentum Nontokozo Madonsela said the financial services giant runs several financial literacy initiatives, including:

Metro Kickstarz – teaching high school pupils the basics of financial management and entrepreneurship.

Making Money Matter – a financial literacy board game aimed at Grade 9 pupils and aligned to the economic management science curriculum.

Motheo Financial Dialogues – for final-year students at technical and vocational education and training colleges, which prepares them for the financial responsibility of earning for the first time.

Over the last 10 years, the SA Insurance Association has spent more than R100 million on consumer education initiatives.

“It is only through such endeavours that we may be able to have most South Africans participating meaningfully in our economic growth and in the opportunities that may arise from it,” says association chair Lize Lambrechts.

A simple improvement in education and financial literacy is not enough unless consumers are prepared to change their behaviour.

The percentage of households considered financially well declined 1% from 26.5% last

year to 25.5% this year. Almost three-quarters of SA households have been financially unwell for some time and households where a female is the most financially knowledgeable person, earned only 36.8% of all wages, pulled in 31.8% of investment income and took home just 23.4% of net profits.

The research showed a need to improve the ability of women to take control of financial literacy, access to quality advice, assistance with planning and goal setting.