Financial literacy is a necessary skill that all South Africans should have. It enables you to gain a better understanding of your financial situation, objectives, and how to manage your finances effectively. By managing your finances responsibly, whether through budgeting, saving, or investing, you can make well-informed decisions and increase your chances of achieving your set goals.
According to CNBC, 50% of South Africans are financially illiterate, and only 5% will retire comfortably. In today’s world, where information is easily accessible, these skills should be easily obtained. However, macroeconomic issues hinder many individuals from accessing this information. Additionally, people often don’t realize the importance of financial management and investing until their 20s or 30s, potentially after making several mistakes.
Why Is It Important To Understand Financial Literacy?
Considering the impact that money has on our lives, it’s important to manage your finances and make wise decisions for long-term benefits. By managing your money well, you can greatly influence your social and financial surroundings.
The rising prices and cost of living necessitate careful examination of financial practices to identify any flaws. Lack of financial literacy can lead to unmanageable situations, crippled credit scores, fraud victimization, and irreconcilable damage to both finances and mental health.
Vantage Sees Firsthand The Impact Of Financial Illiteracy
At Vantage Debt Management we see a lot of over-indebted clients and consumers struggling to make ends meet but also find it hard to stick to the rehabilitation program. It’s evident that there’s still a huge gap that needs to be filled with information surrounding financial education. By providing more information and resources, we can close this gap and empower individuals to make better financial decisions.
Here Are 5 Things To Focus On In Order To Boost Your Financial Literacy
Vantage proposes adopting five financial pillars to manage finances and make informed decisions.
Creating a budget will help you identify areas where you can cut back and see where your money is going, as well as how you should allocate your funds. It’s important to have a comprehensive understanding of your expenses and track your spending on both essential and non-essential items on a monthly basis. After the month has ended, make the necessary adjustments and implement them in the current month.
2. Managing Debt
It is crucial to comprehend and control debt for long-term purposes because it can have a negative impact on your savings and investment habits. Consumers must be cautious about the cost of borrowing, such as the interest and other fees. Hence, it’s not always wise to utilise credit, especially if it doesn’t contribute to creating wealth or improving your current financial situation and life.
Saving has been encouraged among all South Africans over the years. The COVID-19 pandemic has highlighted the importance of having an emergency savings pot. In a crisis, an emergency fund is essential for meeting unexpected expenses without financial difficulty. Additionally, if you have extra funds you can open an investment account that will help you in creating wealth and saving for retirement. Without mastering the pillars of budgeting and managing debt, saving will be difficult to conquer.
4. Understanding Your Credit Score
Your credit score reflects your creditworthiness and ability to repay debt. Having a high credit score improves your likelihood of being approved for loans or credit with fair terms and rates. In contrast, a bad credit score can limit your options and make it difficult to get approved for credit, insurance, and employment. To maintain a good credit score, pay bills on time, avoid excessive debt, and keep credit utilisation low.
5. Insure To Protect
Insurance is a way to protect yourself from unexpected expenses that may arise in the future. You can get insurance for various things such as your income, health, life, and assets. The main idea behind insuring your assets is to provide protection in the event of an unfortunate occurrence. Unfortunately, many South Africans lack emergency savings and are largely uninsured. This opens up the risk of falling into debt traps when situations arise.
Together Let’s Envision A Nation Where Financial Literacy Is A Gift Accessible To All
Many South Africans often make poor financial decisions because they tend to focus on their immediate needs rather than considering the long-term benefits. It’s important for individuals to educate themselves and adopt new financial strategies that will help them in the long run. There are various saving methods available, such as tax-free savings & stokvels, which can assist people in prioritising their long-term goals.