We hear a lot about financial literacy here in South Africa and the fact that the basics of money-matter education have not penetrated deeply enough into the population. But what is financial literacy? 
Being financially literate gives you the key to becoming financially secure. Unfortunately, here in South Africa, many of the younger generation have never gained even the most fundamental principles of financial literacy which is not only bad for themselves, but it doesn’t bode well for the future prosperity of the South African economy either.
Financial literacy is not confined to the young
But it’s not just younger people who are bereft of financial knowledge. A couple of years ago, in 2016, the Bureau of Market Research at Unisa carried out a study entitled the Momentum Financial Wellness Study. It showed that there are many entire South African households in the high-income bracket that also fell into the financially under-educated category.
In another survey undertaken by the Financial Services Board, the literacy rate here in South Africa across the board came out at 51%. As far as other developing countries are concerned this is higher than most and is equal, or thereabouts, to some other developed nations.
The fact of the matter is though that South Africans do like bigger houses and larger cars and to get these they use various credit facilities. The downside of this, however, is that people often get into debt they cannot afford, and this is one of the things that financial literacy can help to avoid.
The basics of financial literacy
Financial literacy teaches you to become familiar with the workings of money. There are five concepts that you need to take on board and understand. They are:
- The basics of budgeting
- The effect of interest
- The importance of saving
- Losing credit viability
- The dangers of identity theft.
In the previous paragraph, we made mention of the fact of how easy it is to get into unaffordable credit debt. Each credit agreement you take out may seem affordable when viewed in its own right. But if you only ever pay off the minimum each month, the loan sum only reduces very slightly.
Before you know it, you can end up owing a considerable total when you take all of your loans into account, and this debt will cost you dearly in terms of interest.
What you can learn from financial literacy education
A financial literacy course will teach you all you need to know about the impact of interest rates and how to do appropriate research before you take on the debt. It will also show you the importance of maintaining good credit credentials. If you become black-listed by anyone creditor, you will find it difficult to borrow money from any company.
But not all debt is bad debt. In fact, taking out one large loan to pay off several other smaller loans can work out beneficially, and once again, this is something that financial literacy will teach you. There is a good article you can check out entitled, “The Four Pillars of Financial Literacy and Why They’re Important.” It’s well worth reading through as it contains some very useful information.
As a country, South Africa is tackling the lack of financial literacy in a serious way. There are a number of initiatives including a very interesting one called “Financial Education by the Youth for the Youth.” You can find out more about this from the IOL.co.za website.
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