Financial Literacy: Just 1 in 4 South Africans Understand Inflation Outcomes0
The 2016 OECD report on adult financial literacy competencies revealed that South Africa is one of the world’s least financially literate. Find out more.
The 2016 OECD study of adult financial literacy competencies around the world has revealed that South Africa is significantly under-performing, making it one of the world’s least financially literate. With many organizations, from Operation HOPE, to Wonga.co.za’s new educational resources, striving to improve financial knowledge in the country, we’ve delved into the OECD statistics to get a clearer picture of “money smarts” in our nation.
A few revealing statistics…
- 25% of South Africans understood what the effect one year of steady inflation would have on their purchasing power. By comparison, an average of 63% of adults across all participating countries understood the outcomes.
- Just under 50% of South Africans reported that their income did not always cover their living costs, while a little over 30% claimed that they borrowed to make ends meet. Although these levels are not as high as those in Turkey, Belarus and Thailand, these statistics still point to South Africa as a worryingly financially fragile nation.
- When asked to complete a simple calculation to work out interest on savings, just 42% of South Africans answered correctly, putting the nation once again at the bottom of the heap, just before Belarus, Malaysia and the British Virgin Islands.
- South Africans were also the worst performing OECD nation when it came to understanding the time-sensitive nature of many financial issues. Just 48% agreed that they paid their bills on time, by far the worst performance in the OECD survey and far below the global average of 84%.
But it’s not all negativity. 70% of South Africans were able to demonstrate understanding of the concept of interest and answer a question regarding interest payments correctly, placing the country just a little below the global average of 85%. On the downside, this percentage placed the nation as one of the least aware nations, second only to Malaysia. In the best performing country, Finland, 98% of respondents answered the same question correctly.
There’s also a gender divide at work in the country when it comes to financial literacy. 34% of South African men achieved the survey’s minimum target score of 5, while only 28% of women attained the same score (the global average is 61% for men and 51% for women respectively).
South Africans responding to the OECD survey also appeared to be worryingly over-confident about their financial literacy. The survey asked participants to rate their financial knowledge, with just under 10% ranking their knowledge as “very high”, around 18% rating their know how as “quite high”, 45% defining themselves as “about average” and around 32% claiming their financial literacy to be “quite low” or “very low”.
Considering that just 31% of South Africans achieved the minimum target score (far below the survey average of 56%), these self-reported competencies suggest over-confidence about finance in the country, potentially leaving many vulnerable to fraud and dangerous financial misjudgments.
In a similar vein, just 40% of South Africans claim to be active savers (below the global average of 60%), but a comparatively high percentage of the population actively use financial and credit products. 64% of South Africans hold a savings or retirement product, just above the global average of 63%, prompting concerns about the suitability and shrewd use of these products.
by Stephen G Davies
Photo: flickr.comTags: adult financial literacy competencies, financial knowledge, inflation outcomes, south africa