JSE pushes for youth financial literacy

12 August 2011

The JSE has partnered with the Reserve Bank, the Financial Planning Institute, the SA Savings Institute and the National Credit Regulator to improve financial literacy among young South Africans.

The JSE and its partners held a National Youth Financial Literacy Day workshop at Johannesburg’s Sandton Convention centre this week for the benefit of young people wanting to know more about money matters.

The workshop covered a range of topics including basics in economics, savings and money management, the role of the South African Reserve bank, investment opportunities on the JSE, credit rights and the importance of sound financial planning.

National Youth Financial Literacy Day, to be held annually, follows last month’s national savings month, and forms part of the JSE’s project aimed at growing the economy by taking financial knowledge and literacy to young people.

“As part of the focus on financial literacy, the JSE has a contractual agreement with several provincial Education Departments through which the exchange provides courses to schools which teach learners and teachers about banks, savings, investment and related topics,” JSE executive Noah Greenhill said in a statement this week.

He said that making financial literacy part of the syllabus would help develop an investment- and saving-savvy South African population.

“Long-term national saving rates do not go up by accident – nor do they do so quickly,” Greenhill said. “Inevitably, with or without large inflows from outside, the vast bulk of domestic investment is still financed by its own citizens, and in recognition of this fact we have implemented a number of initiatives to educate the wider public about the world of investing.”

Investing, sticking to long term plans

Given recent world events, the importance of investing and sticking to a long term plan is vitally important for the youth.

Knowing, for example, how to use credit wisely is critical, especially for the increasingly number of youth headed households. Credit bureau records show there are 18.6-million credit-active consumers across the various age categories in the country, with 46.4% consumers having impaired records.

“If one is financially smart, one can use credit successfully,” said the National Credit Regulator’s Darrell Beghin. “Saving instead of spending without a budget and life plan, not being seduced by instant gratification, avoiding taking on unnecessary credit, and paying well in terms of any credit that is taken on – all of these habits make for highly desirable consumers who will also have benefits for credit providers and the economy.”

Everybody can, should save

The South African Savings Institute’s Elizabeth Lwanga-Nanziri pointed out that South Africa had a dismal savings rate, especially at a household level (at 0.2% of GDP), adding that a high savings rate was desirable for sustainable growth and to fight poverty and household vulnerability.

“Domestic savings mobilisation helps the poor to get out poverty, as is access to key information,” she said. “A financially literate population will understand financial facts and concepts, appreciate financial risks and opportunities to make informed decisions, know where to go for help, and ultimately take actions that improve theirs and the country’s financial health.”

The recurring theme is that everybody can, and should, save. “Typically people spend first and then save, but that is the wrong way around. We need to learn to save first and then spend, even if that means only saving R1 of R10,” said JustOneLap’s Simon Brown. “It is a culture and tradition of saving and investing that needs to be instilled in our youth that is vital to achieving financial freedom.

“For the youth they have the benefit of time on their side and need to start as soon as possible.”

JustOneLap is a free resource for people to use and expand their knowledge about money, through a series of webinars, 100-second tips and other relevant content.

Negative spill over effects

The Global Competitiveness Report for 2010/11 notes that South Africa’s gross savings rate was 15.5% of GDP in 2009, compared to China’s 52.3%, India’s 37.5% and Russia’s 21.9%.

“This low savings rate, especially at household level has got negative spill over effects, leading to an increased burden on the state to provide safety nets,” said the Financial Planning Institute’s Solly Keetse. “Despite the advent of the introduction of the National Credit Act in 2007, many South African consumers face the challenges of high indebtedness and only education and a change of attitude will change that.”

For many years financial literacy has been neglected. There was also general agreement that people should be equipped with social skills, but financial literacy was not necessarily included as one of these skills.

“I am confident that this Financial Literacy Day will make an important contribution to the improvement of the general understanding of financial and economic matters,” said the South African Reserve Bank’s Jannie Rossouw.

SAinfo reporter