South Africans have an unequal grasp of financial literacy, and unless these disparities are addressed, they risk reinforcing long-standing patterns of debt, exclusion, and economic vulnerability rather than enabling upward mobility.
Research by Elizabeth Nanziri and Murray Leibbrandt of the Southern Africa Labour and Development Research Unit (SALDRU) at the University of Cape Town provides one of the most comprehensive profiles of financial literacy in South Africa. Using survey data collected between 2005 and 2009, the authors constructed a national financial literacy index that captures not only financial knowledge, but also attitudes towards, access to, and use of financial services.
Their findings reveal substantial variation in financial literacy across demographic and socioeconomic groups. Below-average financial literacy was consistently associated with younger respondents, individuals with lower levels of education, those living in poorer provinces such as the Eastern Cape, and historically disadvantaged population groups. Women and low-income earners also tended to score lower on the index.
Importantly, the study shows that these disparities are not marginal: demographic characteristics alone accounted for up to 10% of observed differences in financial literacy across individuals.
The link between financial literacy and financial behaviour
National-level assessments captured in the research paint an equally sobering picture.
While the study does not isolate social grant recipients as a separate category, lower financial literacy was strongly associated with characteristics common among households dependent on grants, including low income, limited education, and rural residence.
Awareness of basic consumer protection mechanisms was strikingly weak. Knowledge of the National Credit Act, for example, was almost absent in some surveys, leaving many consumers ill-equipped to navigate formal credit markets or protect themselves against abusive lending practices.
At the same time, fewer than a quarter of respondents demonstrated sufficient understanding of savings and investment products to make informed financial decisions, increasing their exposure to high-cost debt and financial instability.
Subsequent research has reinforced the link between financial literacy and financial behaviour. In a 2018 study, Matwale Reon Matemane examined the financial literacy of black working-class South Africans and found it to be a significant predictor of saving behaviour. Lower levels of financial literacy were associated with weaker saving habits and greater vulnerability to overindebtedness, even among individuals with tertiary qualifications.
These findings underscore that access to financial services alone is insufficient; without the skills to interpret and manage financial products, inclusion may deepen rather than alleviate economic risk.
Financial literacy and retirement planning
The consequences of low financial literacy become even more pronounced when viewed over the life cycle. A 2022 study by Nyasha Dhlembeu, Mamekwa Kekana and Mpinda Mvita examined the influence of financial literacy on retirement planning using data from the 2011 South African Social Attitudes Survey. The authors found that financial literacy significantly increases the likelihood that individuals actively plan for retirement. Yet only 24% of South Africans reported planning for retirement.
The study also identified stark demographic patterns. Financial literacy and retirement planning were both particularly low among women, individuals with lower levels of education, and Black African respondents. These findings align with prior evidence on general financial literacy and suggest that inequality in financial capability extends beyond short-term money management to shape long-term financial security.
Importantly, the authors caution that financial literacy does not guarantee retirement preparedness, but it substantially improves the probability that individuals engage in forward-looking financial behaviour. In a pension environment that increasingly shifts responsibility from employers and the state to individuals, this gap has serious implications. Poor retirement planning increases the likelihood of dependency on family members or government grants in old age, placing additional strain on already constrained public resources.
Implications for equality
Taken together, this body of research suggests that low financial literacy is both a symptom and a reinforcing mechanism of structural inequality in South Africa. Limited financial capability constrains households’ ability to smooth consumption, accumulate assets, and prepare for retirement, particularly in an economy characterised by high unemployment, slow growth, and widespread reliance on social transfers.
Breaking the cycle of poverty, therefore, requires more than expanding access to financial services. Without targeted and sustained investment in financial education, particularly for young people, women, low-income earners, and historically disadvantaged communities, greater inclusion risks exposing vulnerable households to new financial risks rather than building long-term economic resilience.
