Financial literacy isn’t as complex as most people set it out to be. It’s the ability to understand and apply financial skills including those related to saving, investing and budgeting. It’s a skill that everyone has the ability to master but one that many seem to overlook the most.
In South Africa, we have a highly sophisticated and regulated financial services industry that offers a wide variety of services to everyday South Africans. However, we can’t rely on regulation alone to protect consumers of these financial products – many consumers take out these products without knowing the risks they’re taking on. This is where financial literacy plays a crucial role.
Why is it important?
It will help you to manage your money with confidence. Financially literate individuals understand how to budget, how to manage their debt, how to plan for retirement and how an emergency fund works. It’s a skill you’ll use over and over again throughout your life.
For many of us, if we have our financial life under control, it tends to impact other aspects of our lives like our family and relationships. Once you have the confidence to manage your financial life, you can then focus your energy on other important aspects money can’t buy – family, friends and hobbies. You could think of it as a tool that will help you to achieve a more comfortable life for yourself.
It allows you to help others
There are two ways in which improving your financial literacy can help others. Firstly, you’ll be able to pass on this knowledge to younger generations – think about the younger kids in your family. Exposing children to the theories surrounding financial independence at a young age benefits them by teaching them how to be independent and disciplined.
The second way is by helping those less fortunate than us. Once you have your own financial affairs in order, you can put aside a portion for savings, investments and emergency situations. If those are all covered, you may even have a bit left over to pass on to those less fortunate than yourself.
As an added incentive from the South African Revenue Services (SARS), you can also benefit if the charity/organisation which you’re donating to is registered and is able to provide a s18A tax certificate for your donation.
How do I build financial literacy?
If you’ve gotten this far, chances are you’ve been doing it for a while now. Keep reading our Slice newsletters and keep on engaging with the 22seven app to keep track of your spending and financial goals.
It’s not something that happens overnight, so you need to regularly engage with informative financial content. This doesn’t always mean reading long and boring financial explainers – search for influencers on social media, find interesting and informative podcasts and ask those around you what they’re doing to improve their financial literacy.
If you’re struggling to get started, you can have a look at: