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Financial education should support economic opportunities

28 July 2022 Momentum Metropolitan

Financial education is a crucial foundation for raising financial literacy and informing the next generations of consumers, workers, and citizens – and it should be considered as important as basic literacy such as the ability to read and write.

In South Africa, where poverty and inequality have robbed many young people of the ability to understand how they can achieve financial freedom, the lack of financial literacy among young people and students is a great concern and needs immediate attention.

The findings released in the Eighty20/XDS Credit Stress Report 2022 Q1 showed, for example, that the total number of credit-active individuals has remained below 19 million for a year but has grown for the past three quarters. This quarterly report highlights the impact of the economic pressures faced by South African consumers.

As a developing country, South Africa needs to design and deliver consumer financial education programmes that support the economic opportunities inherent in entrepreneurship — and from a young age — and we need policymakers to support this, by removing unnecessary red tape and barriers to business.

Financial literacy as a fundamental right

Financial education today is like a global passport that allows everyone to make the most of the plethora of financial products available in the market and to make sound financial decisions. As such, financial literacy should be seen as a fundamental right and universal need for everyone, rather than the privileged few.

Given the rising cost of education, high levels of student loan debts and the need for young people to start contributing to retirement savings as early as possible, the role of financial education in schools and higher education institutions cannot be overstated.

As a university student, understanding the importance of making smart money decisions will assist in the prevention of the debt cycle that so many South Africans find themselves in. For learners in schools, we encourage conversations about money at home, which will assist them in facing the topic that many of us avoid at an early age.

The basic education system can be transformational by putting in place the necessary tools and mechanisms to teach learners financial literacy. It is important to target students in universities and young adults to empower them with the necessary skills to make sound financial decisions when they want to buy cars, houses or initiate retirement savings plans.

A driver of positive financial behaviour

There is ample evidence of the impact of financial literacy on people’s decisions and financial behaviours. For example, financial literacy has been proven to affect both saving and investment behaviour and debt management and borrowing practices.

An essential indicator of people’s ability to make financial decisions is their level of financial literacy. The Organisation for Economic Co-operation and Development (OECD) aptly defines financial literacy as not only the knowledge and understanding of financial concepts and risks but also the skills, motivation, and confidence to apply such knowledge and understanding to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in the mainstream economy. In this way, financial literacy refers to both knowledge and financial behaviour.

It is for this reason that the Momentum Metropolitan Foundation offers financial literacy to participants of our Socio-Economic Development partners. Our beneficiaries include higher learning institutions, youth in communities and organisations, particularly those who contribute to civil society in the work they do. With a strong focus on entrepreneurship in our Metropolitan KickStarz programme, the aim is to provide the youth with choices of an alternative income other than income generated from traditional means.

At Momentum Metropolitan, consumer financial education forms part of our corporate social investment mandate to uplift and empower youth, as we believe they are important in driving societal changes. We are investing in young people as the future of our country by funding financial education programmes in higher educational institutions, and this is part of our strategy aimed at empowering youth with income-generating opportunities.

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