BUSINESS NEWS - Financial literacy is becoming increasingly important for South African households navigating rising living costs, inflation and interest rate uncertainty, with basic financial knowledge playing a crucial role in managing debt, building savings and securing long-term financial stability.
Aubrey Faba, provincial head at Momentum Financial Planning, says understanding budgeting, interest and debt can help households make informed decisions and improve their financial prospects across generations.
Financial literacy is not limited to high-income earners, but is an important tool for households seeking to move beyond day-to-day financial pressures and work towards lasting financial security.
Financial knowledge can benefit future generations
A better understanding of personal finances can influence how an entire household manages money, approaches debt and plans for the future.
According to the Momentum Financial Advice Research Report, approximately 77% of South African households rely exclusively on their own knowledge, skills or experience to manage their finances.
While taking responsibility for personal finances is important, limited financial knowledge can make it more difficult to assess risks, identify opportunities and make decisions that support long-term wealth creation.
Financial literacy can also help households reduce money-related stress and develop more sustainable financial habits, creating a foundation for future generations.
The value of professional financial advice
Although many households manage their finances independently, research suggests that access to professional financial advice can make a significant difference to wealth accumulation. The Momentum report found that the average investment holdings of households with a financial adviser were 9.5 times greater than those of households without an adviser.
It also found that households using a professional, certified financial adviser had greater wealth across several asset categories, including pensions and long-term insurance, than households relying on other sources of advice.
Professional advice can help individuals identify gaps in their financial knowledge, establish realistic goals and develop a plan suited to their circumstances. It can also provide an independent perspective when navigating complex financial decisions, from retirement planning and insurance to investments and debt management.
Why more households are not seeking advice
Despite the potential benefits, only 9% of South African households currently use professional financial advisers, according to the report. One barrier is the perception that financial advice is primarily intended for wealthy individuals.
Others may believe professional guidance is only necessary when they encounter financial difficulties. This can result in households seeking assistance only after a crisis, rather than using financial planning proactively to prepare for future expenses, protect their assets and build wealth over time.
A more proactive approach allows individuals to review their financial position, identify potential risks and make adjustments as their circumstances change.
Taking control of your financial future
Improving financial literacy starts with understanding income and expenditure, managing debt responsibly and setting achievable savings and investment goals. For households struggling with financial uncertainty, seeking professional guidance can also help turn broad ambitions into a practical plan.
Faba says combining financial knowledge with sound advice can help individuals take greater control of their financial circumstances and work towards their long-term goals.
Ultimately, financial literacy is about more than managing monthly expenses. It provides households with the tools to make informed decisions, build financial resilience and create opportunities for future generations.
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