What is financial literacy?
The OECD defines financial literacy as a “combination of financial awareness, knowledge, skills, attitudes and behaviours necessary to make sound financial decisions and ultimately achieve individual financial well-being”.
Many adults lack an understanding of financial concepts, and how to apply basic financial skills, making it difficult for them to make good financial decisions. Underdeveloped financial literacy directly affects people’s ability to manage their money and understand how to spend, save, borrow and invest.
Although research findings differ – 2022 research conducted by the Financial Services Conduct Authority (FSCA) estimated that 51% of South African adults are financially illiterate, while a 2019 National Income Dynamics Study (NIDS) discussion paper put this figure at just over 40%, similar to the S&P FinLit Survey’s figure of 42% – the numbers are not encouraging.
More needs to be done to help ordinary South Africans understand money and make better financial decisions.
Why is financial literacy important?
Financial literacy is essential as it empowers people to make informed decisions about managing their money, which leads to greater financial security. It helps them avoid making costly mistakes, becoming victims of fraud, or or accumulating unsustainable debt, for example.
Being financially literate is a precondition to achieving your goals and being meaningfully included in an economy. In particularly, it provides underserved populations – low-income households, women, and rural communities – with access to formal financial systems and allows them to secure credit, protect their assets, and build wealth.
Financial literacy is essential for the development of a strong middle class, which is the cornerstone of financial stability and upward mobility in any country. It also helps to boost entrepreneurship and contribute to economic growth.
Financial literacy: the global picture
The OECD International Network on Financial Education (OECD/INFE) 2023 International Survey of Adult Financial Literary assessed financial literacy in 39 countries and economies around the world. On average, only 34% of adults reached the minimum target score on financial literacy, which is at least 70 points out of 100. South Africa was not one of the countries assessed. However, in the 2016 survey, South Africa achieved the lowest minimum target score for financial knowledge of the 32 countries surveyed, achieving 31%.
In 2014, Standard & Poor’s Ratings Services Global Financial Literacy Survey revealed that only one in three adults worldwide could understand basic financial concepts, with low-income households, women and lower educated respondents more likely to suffer from gaps in financial knowledge.
On average, around 55% of adults in major advances economies, such as the United Kingdom, the United States, Canada, France, Germany, Italy and Japan, were financially literate (rates vary widely, from 37% in Italy to 68% in Canada). By contrast, in the so-called BRICS countries (Brazil, Russia, India, China and South Africa), 28% of adults were considered financially literate, on average (rates ranged from 24% in India to 42% in South Africa).
Financial literacy at home
The South African Social Attitudes Survey (SASAS) has been conducted by the Financial Sector Conduct Authority (FSCA) in partnership with the Human Sciences Research Council (HSRC) in 2012, 2013, 2015, 2017 and 2020. In 2020, the survey examined patterns of financial literacy over the past decade. The 2020 survey showed that South Africans scored an average of 51 out of 100 in the ‘financial knowledge domain’ – a decline from what was seen in 2015. However, about half the adult population want to learn more about financial products and services. This is encouraging as it suggests South Africans are not satisfied with the status quo.
The vast majority know that improving their financial literacy will lead to both personal and professional opportunities. In 2016, the Gordon Institute of Business Science (GIBS) investigated the use of financial literacy concepts by entrepreneurs in the small and medium enterprise sector in Mpumalanga. The research set out to understand the extent to which entrepreneurs in the SME sector pursued financial literacy concepts – budgeting, investing and borrowing – in managing their business finances. The study also aimed to establish the relationship between the use of financial literacy concepts and the performance of the SMEs. The results showed, among other things, that there is a positive relationship between the use of financial literary concepts and the economic success of SMEs.
Although South Africa performs poorly when it comes to financial literacy, the government, regulators, companies and nonprofits are taking steps to change this.
- In November 2021, a two-year-long multi-phase programme to assist business owners in townships with financial and business skills came to an end. Rolled out by the Association for Savings and Investment South Africa (ASISA), the Financial Literacy and micro-enterprise (FLAME) programme uses financial literacy as a core development tool and is now in its third iteration (FLAME 3.0). The Financial Sector Conduct Authority (FSCA)’s MyMoney Learning Series offers free courses across five themes: Financially Smart, Financial Safeguard, Financial Protection, Financial Knowledge, and Business Finance. It is available as an e-learning Tcomponent on the FSCA’s consumer website.
- Capitec’s MoneyUp Academy (previously the Live Better Academy) focuses on teaching South Africans how to invest, reach certain financial goals, and achieve financial freedom. There are a variety of free short courses on offer. Capitec has taken steps to help close the literacy gap and foster financial inclusion in South Africa.
- Old Mutual offers a variety of online educational resources to help South Africans, such as its Moneyversity courses and its On the Money programme.
- Momentum Metropolitan is developing the next phase of its flagship programme Motheo Financial Dialogues, Motheo 2.0, which will be offered to higher learning intuitions, work readiness programmes, and young people entering the world of work. The programme will be implemented in three phases over three years into the 2026 financial year to support the company’s consumer financial education strategy.
- Standard Bank’s WalletWise is a financial education initiative that improves financial outcomes among participants. It provides information and tips on a variety of topics, including credit health, insurance, bank accounts, saving and investing, and more.
- Money School attempts to educate young South Africans about finance by delivering financial literacy content to grade 11 and 12 learners at quintile 1-3 schools nationwide. The virtual learning platform livestreams interactive lessons to a learner base of more than 45 schools throughout the country. The nine-week programmes, currently sponsored by Satrix, focus on basic financial skills and concepts of investing as well as budgeting, saving, and managing debt.
- Avo Vision empowers small, medium and micro enterprises to develop sustainably. As part of its efforts, it offers financial literacy training and webinars to upskill entrepreneurs and employees. It has partnered with companies such as Absa, Woolworths, Hollard, Momentum Metropolitan, Unilever, Sanlam, Standard Bank, Santa, the De Beers Group, African Bank, Nedbank and more to provide individuals with the knowledge, skills and confidence they need to make informed financial decisions.
- Money Savvy Humans is a learning series consisting of both free and paid online courses. Its 10 Steps to Get Money Savvy Online Course is free.
- Nonprofit organisation FunDZA Literacy Trust’s ‘What’s your story?’ is a free resource of stories about the fictional Majola family, which helps readers gain insights into financial literacy concepts. It has collaborated with the Momentum Metropolitan Foundation to focus on basic financial literacy as well as entrepreneurship.
- Taking Care of Business (TCB) is a non-profit social enterprise that empowers unemployed South Africans and their families through small business opportunities, mostly within the circular economy. It runs a full-day training/coaching programme, Me and My Money – My Journey to Financial Freedom – to empower individuals with the mindset and skills they need to become financially literate. In-person training is available in Gauteng, Cape Town, Paarl, Durban and East London, with online training options also available.
- The Money School – the exclusive financial education provider for The Truth About Money, holds financial literacy courses at Boston City Campuses throughout South Africa. This partnership with 1Life aims to provide financial literacy education to the broader South African public through the launch of the 1Life trust. The Money School also provides financial literacy training to company employees and customers.
- Non-profit organisation JA South Africa (formerly Junior Achievement SA) offers 20-hour More Than Money and My Money Biz programmes on how to manage money responsibly for high school learners in grades 8-10. In 2021, JA South Africa partnered with the Momentum Metropolitan Foundation to implement its More than Money programme to more than 360 grade 6-7 learners from Chivirikani Primary School in Ketlehong and Theo Twala Primary School in Springs.
- MoneyTime SA offers online financial literacy programmes for South African children aged 10 to 14. The course helps young adults understand how to manage money.
