On the 17th of October each year, to commemorate the International Day for the Eradication of Poverty, people gather to show their commitment to the resolution of poverty and their solidarity with those afflicted by it. With a shrinking economy and rising unemployment, poverty is a growing concern in South Africa and, according to Statistics South Africa, approximately 50% of the population live below the Upper Bound Poverty Line, with an income of less than R1 227 a month. While many tools are required to win the fight against poverty, financial literacy is one way to help people get out, and stay out of its clutches.
Short term lender, Wonga recently asked over 1 000 of their customers about their attitudes towards money. They found that, despite 88% believing that financial health was ‘extremely important’, the majority (66%) claimed to only have an amateur knowledge of money management.
“We were surprised to find that, despite the perceived importance of financial health, people still viewed their financial knowledge as basic. Financial literacy is key to financial health, it can help people manage their money better to ensure that they prioritise their spending where it’s needed most. It also helps them to avoid the burden of bad or unmanageable debt and safeguard themselves against risks to their financial security”, explains James Williams, Head of Marketing at short term lender, Wonga.
According to Williams, the basic pillars of financial literacy can help people take control of their finances and avoid poverty traps in a number of ways.
Having money in a savings account often serves as a protective barrier, insulating people against the risks of cash flow issues. Experts recommend that all people have access to an emergency fund consisting of at least three to five months’ worth of income in case life throws them a curve ball. This will ensure that they can pay rent and put food on the table if, for example, they lose their job or are in an accident.