The Fundamental Financial Basics We Should Be Teaching Our Kids (And Adults)
It must be said, the latest news about the extent of the South African consumer debt problem does not make for particularly good reading. The research shows that some 10 million South African consumers are currently overburdened by debt. South Africans have always been big users of credit, but with the unemployment rate on the rise and the economy continuing to slump, the signs do not look good.
One of the biggest problems in the country has always been the fact that the levels of financial literacy are among the lowest in the world. This, combined with the ‘bigger house, ‘bigger car lifestyle’ that many South Africans lead can cause debt problems. If South Africans were to receive some fundamental financial education at school then it would be a big step towards improved financial wellness. These are 4 of the financial lessons they really need to learn.
Don’t rely on credit
Recent research has shown that South Africa’s infamous credit card spending is heading in the right direction, which is down. However, there still remains a pervading reliance on credit in South Africa that is difficult to explain. The only way to reduce this reliance on credit is to introduce lessons at school which teach South African children the cost of credit and the importance of not spending money you do not have. Currently, rather than saving to make significant purchases, many consumers choose to access fast cash from lenders like Wonga or buy products on their credit cards and worry about the debt they create at a later date.
Understanding the basics of saving and investing
You don’t need to have an economics degree or be a financial whizz to understand the benefits of saving and investing your money, even if it is only very small amounts. Saving accounts are readily available but they are something very few South Africans have. While investments usually involve some risk, they can also be an effective way of saving money for the future if they are used in the right way. Learning these financial management basics at a young age could help to improve levels of financial wellness in the future.
Learn the difference between good and bad debt
The truth is that debt is only a bad thing when it is used irresponsibly. There are times in all our lives when debt can help us to achieve our goals. For example, very few of us would ever be able to own a home without a mortgage. However, too many young South Africans do not know what constitutes a good and a bad debt. Many don’t even know the basics, such as how to calculate the cost of a debt, or even what APR actually means. These are debt management basics everyone should know.
The importance of planning for the future
A good retirement does not come for free. Many people imagine their retirements being a time of rest, relaxation, holidays and the good things in life, but very few actually think about how they will pay for it. It has been reported in the past that only six percent of South Africans can afford to retire comfortably. Teaching youngsters the importance of saving for the future and taking advantage of company pension schemes and other opportunities they are offered is essential.