Rands and Sense with Motshabi Nomvethe

Rands and Sense

FINANCIAL LITERACY NEEDED TO NAVIGATE BUMPY ROAD AHEAD

THE economic road ahead is, by all accounts, likely to be bumpy, prolonging the financial distress caused by the Covid-19 pandemic and further exacerbated by the knock-on effects of the Russia-Ukraine conflict. Both inflation and interest rates are rising, increasing the cost of most basics such as food, transport, housing and debt. Most households are worried about their finances and some may decide to abandon their new year financial goals.

Adjusting finances because of changed circumstances can be knotty, because many people do not have a basic financial education. The Southern Africa Labour and Development Research Unit estimates that only 41% of the population is financially literate. Consequently, given the constrained financial situation, it may be tempting for small businesses and households to stop their short-term business insurance or life insurance cover. For those who give in to this enticement there is an increased likelihood of financial ruin.

In the 2021 PPS Graduate Professional Index, a survey completed by 3 264 members of the Professional Provident Society (PPS), a key finding was that most professionals have no financial plans. The survey results also show that 12% of professionals have no type of financial planning in place because they used up spare funds they had available during the pandemic. Their primary and current focus is on surviving.

If you are feeling overwhelmed, confused or uncertain about your finances, the first thing to do is to adjust your budget to suit your changed circumstances and to get in touch with a financial adviser.

Another recent survey conducted by PPS, the 2021 PPS Student Confidence Index, showed that 88% of the survey participants would feel very confident about handling their finances if they had received financial education at school. It also showed that 67% of the 3 304 participants would consult a financial adviser.

So, approaching an expert financial adviser may not be a bad option as, borne out of the fact that, in the same survey, most of the respondents did not fully understand their finances. Only 41% felt comfortable with savings or investing and 42% said they had an average understanding of insurance.

The students who participated are undergraduates and postgraduates studying at a public university or university of technology and studying towards a profession-specific degree, such as engineering, medicine, law or accounting. They responded to the survey through online questionnaires and virtual focus groups.

Nomvethe is head of technical marketing at PPS, a financial services provider that caters exclusively for graduate professionals.

Motshabi Nomvethe