With only 51% of South African adults considered financially literate, it means there are millions of others who are unable to manage money wisely and plan for long-term success.
Financial literacy is important, not only in helping individuals manage their money on a daily basis, but it is vital for financial security in life.
It can also lead to financial exclusion, leads to a lack of decision making on financial products, and may place an individual’s financial security and resilience at risk.
If you do not have a plan in place, there won’t be any rewards.
It is a simple concept of reaping what you sow.
When a child understands the value of money and the power of a solid defensive strategy, they don’t just survive the economy, they win the championship
— Cebile Zibi, head of trade marketing at Momentum Advice
As we mark Financial Literacy Month, we look at the importance of this and how we can drive awareness about it.
Cebile Zibi, head of trade marketing at Momentum Advice, urges parents to prioritise financial literacy at home as a critical life skill.
“We don’t want the next generation to enter adulthood constantly tackling debt and financial stress. By starting the conversation at the dinner table and reinforcing it in the classroom, we give them a massive head start.
“When a child understands the value of money and the power of a solid defensive strategy, they don’t just survive the economy, they win the championship.”
Kashif Noor, head of retail distribution at Ashburton Investments, says conversations on Financial Literacy Month often centre on “restrictive budgeting and cutting back”. “However, true financial literacy is not about deprivation, it is about learning how to design a life of intentionality and purpose, gaining mastery over your money through a few key mindset shifts,” says Noor.
He says money is always psychological.
“Financial stability is built on a foundation of psychological safety. The primary benefit of a financial plan is the confidence that comes from having a documented strategy for unexpected events, such as a market crash or job loss.
“An emergency fund, coupled with a financial plan, acts as a grounding mechanism against financial anxiety. While savings provide liquidity, investing is the mechanism that allows money to grow exponentially through compounding.
“Remember, saving is often about short-term goals and capital preservation, while investing involves putting capital into vehicles like unit trusts, retirement annuities, and tax-free savings or investment accounts, depending on an individual’s goals, time horizon and circumstances, to achieve long-term growth.”
Protecting your future self, says Noor, is the most profound form of wealth building.
“This does not have to cost an arm and a leg,” he reassures. “Even starting with as little as R100 a month in a low-barrier-to-entry investment can lead to significant wealth creation over time.”
Zibi gives tips on how you can teach your children about finances:
The power of delayed gratification:
The core of financial defence is the ability to say “not yet”. In a world of instant downloads, messaging and one-click shopping, the ability to save is a superpower. Instead of buying a toy on impulse, help your child set a savings goal. This helps them learn that the satisfaction of a hard-earned purchase far outweighs the fleeting thrill of an impulse buy.
Understanding the home ground advantage of interest:
Interest can be a foul when it’s on debt, or a star player when it’s on savings. Use a clear jar for savings so your children can see the pile grow. For older children, introduce the concept of compound growth — the idea that their money is working for them while they sleep. This helps children to stop seeing money as a static object and start seeing it as a tool that can grow.
The needs vs wants playbook:
Every championship team has a playbook. For a child, this means learning to categorise expenses. When grocery shopping, involve them in the choices. Explain why you are choosing a house brand over a luxury label to save for a family weekend away. This allows children to develop a discerning eye for value, protecting them from predatory marketing and lifestyle creep later in life.
Zibi gives age-appropriate money coaching pointers:
Age five to eight:
This is a good time to introduce physical money to your children. Use three glass jars, labelled “save”, “spend” and “give”. This helps to make the abstract concept of budgeting visible to young children.
Age nine to 12:
This is the age children are able to learn the value of earning and choice. Offer a “commission” for extra chores beyond their daily responsibilities to help teach them that effort equals income.
Age 13 to 18:
It’s time to introduce them to real-world banking and digital money. Help them open a bank account, explain how a bank account works, the invisible nature of digital spending and how to track it.
Sowetan
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