Financially illiterate
Studies show that 74% of youth are not involved (or included) in the daily financial management of their household. However, the benefits of involving young people in the household’s financial matters are clear.
“Because of their lack of involvement with money matters at home, our youth are financially illiterate. The results of the financial literacy section of the 2015 South African Social Attitudes Survey showed that the level of financial literacy among adult South Africans is in the low to moderate range (55 out of 100). The score was even lower for the youth” says Kathryn Main, MD of Money Savvy Kids.
Children who are involved or included in their household financial management display a higher propensity to save, more cautious spending behaviour and a better understanding and knowledge of financial products.
It means our youth have to be equipped because financial illiteracy has serious consequences. Firstly, they get trapped by debt.
“What’s happening at the moment is kids are going to university, and the banks are there offering them these student loans and they start their adult life in debt. They drown in interest because they don’t understand it and are then unable to make wise investment choices in the future. It’s bad enough that 50% of South Africans are in debt, we don’t have to allow our kids to get sucked in as well.
“Secondly, they don’t understand their basic credit rights. Because they are drowning in debt and interest from student loans, their credit score gets messed up. They can’t buy a car, a house or even get a cell phone to their name. And so they struggle along for 10 or 20 years, trying to get rid of the debt and improve their credit score often to no avail
She says that financial illiteracy also undermines saving. “Ask yourself - Why would someone put money aside to invest in something they don’t understand? Financial illiteracy undermines saving – as simple as that.”
In addition, South Africa is a buy-now, pay-later society. The effects on young people’s financial literacy are thus characterised by the same behaviour patterns as parents and society as a whole. These are high credit and high consumer behaviour with very little savings, and in turn high social risk behaviour.
