When speaking about financial literacy, it surpasses basic mathematics knowledge. It is the ability to plan, manage and commit to all areas that affect your financial well-being. It is important to note that financial literacy skills need to be mastered, irrespective of whether you are employed or not.
According to the Financial Sector Conduct Authority 2018, South African financial literacy ranges from low to moderate levels, namely 55 out of 100.
This means that almost 50 per cent of the entire adult population lacks adequate financial literacy. The need for financial literacy is becoming urgent to help us navigate the unprecedented socio-economic times we live in.
We will briefly discuss the five components of financial literacy, namely, (1) earnings, (2) saving, (3) spending, (4) borrowing and (5) protection. To be considered financially literate, it is vital to know, manage and implement the above.
Earnings – pertains to money or proceeds your receive in exchange for working hours. It can also be the proceeds from investments and social grants.
Savings – one of the most critical components of financial literacy is to develop the habit of saving a portion of your earnings. According to a study by GIBS and Investec, government and household savings are poor compared to corporate savings.
Spending – spending wisely and thoughtfully is critical. The best instrument for actively cautious spending is budgeting.
Borrowing – this refers to financial advancements you might need for a specific need or want. Understanding the concept of borrowing and how it affects your financial well-being is essential.
Protecting – this refers to covering your assets, health and life should unforeseen circumstances occur at a certain point in your life.
We will explore these five concepts in detail in the coming episodes.
– Sibusiso is a professional in the financial services sector in Carletonville.
