The introduction of free tertiary education has been hailed by many as an important step towards South Africa’s overall economic transformation. But low levels of financial literacy amongst students could represent a serious barrier towards achieving lasting change.
In an international study of 30 countries by the Organisation for Economic Co-operation and Development (OECD), South Africa performed the worst in terms of financial competency, with the average level of literacy sitting at just 30%.
“As free tertiary education introduces a new demographic of skilled workers to the job market, it is important that they understand how to manage their money, in order to achieve sustainable transformation for themselves and their families.”
According to Dr Andre van Zyl, Director of the Academic Development Centre at the University of Johannesburg, 67% of new enrolments at South African universities are first-generation students, a number that might increase with the introduction of free tertiary education.
“Unfortunately, limited exposure to financial products and services during their formative years has meant that many of these learners lack the knowledge required to make sound financial decisions.”
“As free tertiary education introduces a new demographic of skilled workers to the job market, it is important that they understand how to manage their money, in order to achieve sustainable transformation for themselves and their families.” – Sonja Visser, African Unity Life.
Lack of financial literacy is seen as one of the reasons so many South Africans struggle to budget and turn to credit to make ends meet each month. In turn, this has resulted in the amassing of significant amounts of debt across the South African population, an issue which is evidenced by a household debt-to-disposable income ratio of 72.6% in the second quarter of 2017.
“Ensuring that students are equipped with practical financial knowledge will help them make the most of the economic opportunities afforded to them, thereby enhancing the capacity for free tertiary education to bring about a lasting change in their lives,” says Visser.
She adds that future professionals should know how to develop healthy financial practices like saving, insuring themselves against risk and minimizing spending on credit.
This is an endeavour the Financial Services Board’s (FSB) Consumer Education Department aims to promote through their financial education program of which ‘the promotion of consumer financial education, awareness, confidence and knowledge regarding consumer rights, financial products and services’ is a key objective.
The Financial Sector Conduct Authority (FSCA) has been instrumental in the delivery of a number of financial literacy programs aimed at empowering the youth.
This includes workshops, theatrical performances, competitions and the provision of educational materials to high schools throughout the country. To expand the reach of these programs, they encourage strategic partnerships with other financial organizations – provided that these are offered free of charge and are not promotional in nature.
“This is an important opportunity for financial service providers to be part of a cultural shift towards improved financial wellness for all South Africans,” says Visser.
“Starting financial education at a young age aids in the development of healthy financial habits, so that the young professionals of tomorrow go on to enjoy lasting success,” she adds.