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As South Africans, our experience with money is probably as diverse as our population. This means that a one-size-fits-all approach to financial education is unlikely to be successful, says Farzana Botha, Segment Solutions Manager at Sanlam Savings. “While access to financial infrastructure is one way to broaden socio-economic inclusion, another is addressing the knowledge gap in ways that actually work,” she says.

42% of us have no long-term savings

As a nation, poor financial literacy continues to hamper our ability to save. According to the Human Sciences Research Council’s 2017 report, nearly half of our population doesn’t manage to save at all, with 42% reporting no long-term savings of any kind. A further alarming 2018 Organisation for Economic Co-operation and Development stat ranked us the worst out of 30 countries for financial competency. It’s high time we tackle these realities head-on.

When we know better, we do better

A lack of knowledge leads to a lack of planning, which results in missing the goal in almost every situation. Botha shares an example: How can you save for retirement properly if you don’t know how much you need to save up, and if you don’t fully understand how inflation and interest rates will impact your contributions over time? “This is where tools like retirement planning calculators and Sanlam’s Goal Manager have an important role to play,” she adds.

Three ways a solid financial understanding can make a real difference

  1. You can actively minimise debt to free up disposable income over time
    The 2020 South African debt-to-income ratio was 77%, up from 72% in 2019, indicating a steady rise in consumer debt. “Awareness of income – and having what can be likened to a personal balance sheet – will help you manage debt in relation to income,” says Botha.

  2. You can free up disposable income…
    …which can be used to save and invest for short-, medium- and long-term goals. Botha suggests starting small, with the creation of an emergency fund, for example, to minimise your risk of future debt, and help lead to long-term financial freedom.

    2021 Deloitte research shows that nearly 70% of South Africans were spending all their income – or more income than they earned – every month. “Financial understanding protects us from falling prey to illegitimate financial dealings in desperate times,” says Botha. “Unregistered financial outfits abound and are masterful at misleading people into investing in schemes that can result in permanent financial loss.”

  3. You’ll gain confidence
    This comes through knowledge and becoming competent or proficient in something. Having a solid financial understanding empowers you to set and actively pursue goals.

So, where to start?

“Self-education is the first step,” says Botha. She suggests including these on your checklist to upskill your financial know-how.

Get a grip on your personal finances
Understand your current financial position by looking at your income and expenses and taking into account how much debt you have and what you are paying to service it.

Hold yourself accountable
Take control and personal responsibility for upskilling yourself on the basic principles of finances. This includes self-reading, research and asking questions.

“Take control and personal responsibility for upskilling yourself on the basic principles of finances. This includes self-reading, research and asking questions,” says Farzana Botha, Segment Solutions Manager at Sanlam Savings.

Get the right help

Speak to professionals in taxes, estate planning and financial planning, who can offer solutions that meet your unique needs. If you don’t already have a financial adviser, make an appointment to meet one.

Once you’re confident in your knowledge and skills, share it with others, Botha continues. Developing a culture that prioritises financial literacy needs to include children especially. “From as early as childhood or adolescence, learning how to manage money is a vital life skill,” says Botha. “Games like Monopoly can help to teach children how to manage cash flow and debt, as well as the financial consequences of certain actions.”

Then bring those lessons into real life. Earning money through chores and learning how to budget are good ways to start teaching children to manage money, says Botha. The recently launched Sanlam Savings Jar app helps them learn basic financial concepts in an interactive, engaging way. Opening a bank account as soon as possible can also help teach them about interest rates and inflation.

How we’re bridging the gap

At Sanlam, our goal is to enable you to live with confidence, and we take financial education seriously. We run various programmes through our Foundation, primarily targeting numeracy, a long-standing example being our 20-year+ partnership with Takalani Sesame. We also engage in annual Savings Month campaigns, which use the currency of creativity to reach people in new ways. The recently launched Sanlam Saving Jar app achieves this by turning saving into a fun quest for kids.

It will take the collective will to really move the needle and to change people’s lives. The sooner we throw our weight behind meaningful financial literacy initiatives, the sooner we’ll make a difference.

 

 

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