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Context: Financial Literacy in South Africa

It is critical to address financial literacy – the ability to understand financial concepts and make basic financial calculations – in order to increase financial access in South Africa. The country has one of the highest levels of income and wealth inequality in the world, and financial literacy skills are underdeveloped, affecting people’s decisions about how they spend, save, borrow or invest. According to a 2019 National Income Dynamics Study (NIDS) discussion paper, just over 40% of South Africans are financially literate, which is similar to the S&P FinLit Survey estimate of 42%. This worryingly low figure indicates that more needs to be done to help ordinary South Africans understand money and make better financial decisions.  

Context: Financial literacy in South Africa

It is critical to address financial literacy – the ability to understand financial concepts and make basic financial calculations – in order to increase financial access in South Africa. The country has one of the highest levels of income and wealth inequality in the world, and financial literacy skills are underdeveloped, affecting people’s decisions about how they spend, save, borrow or invest. According to a 2019 National Income Dynamics Study (NIDS) discussion paper, just over 40% of South Africans are financially literate, which is similar to the S&P FinLit Survey estimate of 42%. This worryingly low figure indicates that more needs to be done to help ordinary South Africans understand money and make better financial decisions.  

Momentum Household Financial Wellness Index

The financial well-being of each household has a direct impact on the country’s economic stability. With household debt far exceeding disposable income, and high unemployment, how prepared is the average South African household for unforeseen financial setbacks?

The Momentum Unisa Household Financial Wellness Index seeks to not only determine the state of the nation’s financial wellness, but provide effective insights to help enhance the financial wellness of all South Africans.

Financial Literacy around the World: : Insights from the Standard & Poor’s Ratings Services Global Financial Literacy Survey

This 2015 study indicates that only one in three adults is financially literate globally. “Not only is financial illiteracy widespread, but there are big variations among countries and groups. For example, women, the poor, and lower educated respondents are more likely to suffer from gaps in financial knowledge. This is true not only in developing economies but also in countries with well-developed financial markets,” the study says. In the BRIC countries, on average, 28% of adults are financially literate, but disparities exist as 42% of South Africans are literate, whereas only 24% of Indians fall into this category.

 

 

 

The use of financial literacy concepts by entrepreneurs in the small and medium enterprise sector in Mpumalanga Province, South Africa

Financial literacy is one of the key factors that impact on the success of small and medium enterprises (SMEs) globally. The objective of this study is to understand the extent to which entrepreneurs in the SME sector pursue the financial literacy concepts, namely, budgeting, investing and borrowing in managing their business finances. The study also aims to establish the relationship between the use of financial literacy concepts and performance of the SMEs. 

Read more: The use of financial literacy concepts by entrepreneurs in the small and medium enterprise sector...

Why Financial Literacy is So Important

"Financial literacy is crucial to help ensure consumers save enough to provide adequate income in retirement while avoiding high levels of debt that might result in bankruptcy and foreclosures. A few years ago, a study from financial services company TIAA-CREF showed that those with high financial literacy plan for retirement and in essence have double the wealth of people who do not plan for retirement. Conversely, those with low financial literacy borrow more, have less wealth and end up paying unnecessary fees for financial products."


Source: Why Financial Literacy is So Important | Investopedia 

 

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