What will make you money-wise?

As part of its Science of Success festival, the Momentum Unisa Household Financial Wellness Index for 2023 has been released. It is a yearly report showing an image of the money affairs of South African households. This year there is a major focus on financial literacy.

The report shows and explains that financial literacy is not an end in itself. If people know about money, it helps with the following:

• Accumulating wealth
• Retirement planning
• Home ownership
• Borrowing decisions
• Investment decisions

It also helps with making sure that more people get access to financial products and services. So, are you “born” to be financially literate, that means, you are of a certain gender or in a certain age or population group? Does how employed you are determine it?

The report shows more males (17,5%) than females (12,9%) are financially literate: “This is not surprising as more males than females are generally studying in numeracy fields such as engineering, mathematics, and statistics, something that is being addressed actively in the world.”

Regarding age, there seems to be a “hump” in financial literacy – worldwide. This means the youngest and oldest age groups know less about money matters than those between the ages of 25 to 34 years, and 35 to 44 years.

Population group, which is a proxy, in South Africa, to how privileged someone is, shows the lack of financial literacy is widespread across all demographic groups. Most financially literate households are black African (11,3% of all households), and even though the white population group shows up as the most financially literate, their literacy of 22,3% is still pretty low.

The report is adamant that a good or high income doesn’t mean a person knows about money automatically. People earning R5 000 per month are often the most financially literate. A job doesn’t make you money-wise either. Just more than 18% of paid employees are financially literate.

All of this means that it is your knowledge and how you empower yourself with knowledge that will make the difference – not your gender, age, race or employment.

• Do you understand numbers?
• Can you calculate simple interest?
• Can you calculate compound interest (or have someone you can ask)?
• Do you know what inflation is and how it eats away at the value of money?
• Do you know that you shouldn’t put all your eggs (money) in one basket?
• Do you know how to spread your risk if you invest your money?
• Do you know what kind of investments will put your money at more risk?

So, what does all of this tell us? The report points out how much you will benefit if you empower yourself by working on the above skills. You’ll be surprised how much you will pick up in a short space of time by just listening to the radio or browsing the internet. You can also ask a financial adviser to talk you through the basics. That is how they earn their income – by giving you informed advice that works for you in your circumstances.

The biggest mistake you can make is to overestimate your own knowledge and to listen to stories about how to get rich quickly. Paul Nixon, an investments behaviour specialist at Momentum Investments, says being rich is what people can see, but your true wealth is your investments. It’s your money that works hard in the background to help you improve your situation.

Johann van Tonder, an economist in the Group Strategy team at Momentum who did a lot of the research for the report, says younger adults who are leaving the nest should try and educate themselves as quickly as possible regarding money matters.

Whether you’re young or old, it’s the biggest favour you can do yourself and your family. Your knowledge will complement whatever income you earn. Do the right things with your money, and you’ll be surprised at the outcome.