Why financial literacy should be a human right

South African Money

“Financial literacy is a survival skill, because it is impossible to survive – and then go on to thrive – in today’s complex economic reality without an understanding of basic money and finance as the foundation of all financial decisions.”

Charlene Lackay, Head of CSI for Momentum Metropolitan Holdings

We know that, as humans, we are born with and entitled to certain rights. As South Africans, the Bill of Rights protects these, which include: the right to equality, human dignity, life, freedom and security, healthcare, food and water, privacy, freedom of religion, belief, opinion and expression, and education.

However, while education stands as a fundamental right, with every South African granted the right to a basic education (including an adult basic education and higher education), financial education is not considered part of this right. But it should be, particularly if we consider the impact of the pandemic on South African households.  

Financial literacy = survival

“Financial literacy is a survival skill, because it is impossible to survive – and then go on to thrive – in today’s complex economic reality without an understanding of basic money and finance as the foundation of all financial decisions,” says Charlene Lackay, Head of CSI for Momentum Metropolitan Holdings.

“Solid financial literacy and planning hold the key to being able to navigate unexpected and challenging events, and there can be no better example of a challenging event than the Covid-19 pandemic and the ongoing lockdown because there is not a single South African household that hasn’t been impacted, be it through salary cuts, job losses or business closures.”

In fact, more and more South African households are becoming financially vulnerable. Momentum and UNISA’s most recent Household Financial Wellness Insights report, published late last year, found that the pandemic and lockdown did not discriminate according to age, education status, gender or any other demographic variables – all groups were affected.

This reality, combined with little economic growth, meant that more South African consumers were worried about their finances than staying safe against the coronavirus itself, according to the Insights report.

And as the impact of the pandemic became more widespread, more South Africans became excluded from participating in economic activity – significantly limiting their access to the financial education that has the power to unlock proper financial planning and success.

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Where success and knowledge meet: financial literacy

“The ability to continue to provide for yourself and your household requires strong financial knowledge, the foundation of which is a good financial education. Without these skills, individuals and entire households can quickly find themselves struggling financially. This makes financial education more important now than ever, and it should be open and accessible for every South African as a basic human right,” says Lackay.

Financial education should also be classified as a human right because households who take greater control over their finances are more likely to enjoy financial success, even during difficult times.

The ability to achieve financial wellness and personal financial success, according to the Household Financial Wellness Insights report, is largely determined by: level of education and experience (human capital); ability to take control of finances/personal empowerment (social capital); the income they receive (physical capital); the net wealth they generate (asset capital); and their living environment (environmental capital). 

“Getting the greatest value in helping both individuals and households to manage their finances and achieve personal financial success requires a solid mix of all five capitals, but particularly human and social capital, combining education and personal empowerment,” says Lackay.

“The most effective way to improve both capitals is by increasing access to financial literacy education that gives South Africans a fair opportunity to make well-informed financial decisions and achieve financial success, as well as broadly help drive the accelerated and sustainable recovery of the South African economy by facilitating responsible spending, saving and borrowing.”

Until financial literacy becomes a cornerstone of education as a human right, South Africans will continue to face barriers that prevent them from making the informed financial decisions that will drive their financial wellness and success.

“We need to start working together in the public and private sectors to ensure that South Africans are able to access and benefit from the knowledge and skills they need to make sound financial decisions and ultimately build their own success,” says Lackay.

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