Retirement funds can reduce financial vulnerability through financial literacy programmes

Katherine Barker, Head of Momentum FundsAtWork.

The latest Momentum/Unisa Consumer Financial Vulnerability Index (CFVI), which measures consumers’ perceptions of their financial state, shows that a lack of financial literacy is the main reason consumers are financially vulnerable. Katherine Barker, Head of FundsAtWork, says given that many consumers are retirement fund members, retirement funds can play an important role in improving financial literacy and reducing financial vulnerability.

The results of the Momentum/Unisa Consumer Financial Vulnerability Index (CFVI) for the fourth quarter of 2017 show that South Africans continue to feel exposed and vulnerable when it comes to their financial situation.

Why are consumers vulnerable?

The index points out that consumers don’t budget and therefore tend to spend on wants rather than on what they need and end up spending more than what they earn. Consumers also don’t consider the risks when taking on more credit.

Who is most vulnerable?

The Momentum CFVI results show people earning below R50 000 per annum are most vulnerable. Given that a large percentage of South African adults earn less than R50 000 per annum, this suggests that the majority of South Africans experience serious financial challenges. According to the CFVI, 18 to 39 year olds are the most financially vulnerable age group. It is also insightful that it is full-time employees, despite their salaries, wages and their high levels of job security who are highly indebted and have very high monthly expenditures.

How can retirement funds help?

Barker says, “Many of these financially vulnerable consumers are also members of a retirement fund by virtue of their employment. Momentum’s Effective Employee Index research confirms a very definite link between an individual’s financial wellness, their physical health and their ability to function optimally when they’re at work. Employees who are over-indebted are disengaged and their productivity levels drop, which in turn impacts on business performance.

Quality consumer financial education which can be accessed by virtue of retirement fund membership can play a big role in helping employees to become financially well, engaged and productive. This is why Momentum developed Motheo Financial Dialogues, an award-winning financial literacy programme that helps retirement fund members and all South Africans to create a solid foundation for their financial wellness journey.” Barker says Momentum is currently extending the scope of this programme and hopes to reach even more retirement fund members in the future.

Consumer Financial Vulnerability Index PDF.