I listened in on the radio as two women spoke about their financial woes. These women, both educated and both black professionals, spoke of the lack of financial literacy in the black community. Their stories were personal. One said she got her driver’s licence 12 years ago and has since driven 11 cars.
“They were beautiful cars,” she quipped, “and I could ‘afford’ them. But now when I look back at the R10 000 – R15 000 a month spent over the last 11 years, with nothing to show, I become extremely frustrated with myself,” she said.
She also spoke of her friend who drove her sweet small Polo.
“She would get promotions. We all grew up and moved into fancier rented spaces. She didn’t. We would say,’Haau friend just buy a car,’ move into a bigger house.”
“You know she would laugh and just say no. Now I’m on car number 11 and she just bought her first brand new but not fancy car.”
“She owns six properties.”
I know many stories like this one and this is why I believe financial education should be part of a coordinated national strategy. It should be taught in schools.
Many young people can be empowered and equipped with the knowledge, skills and confidence to take charge of their lives and build a more secure future for themselves and their families. More needs to be done and it starts by changing our education system.
Why Personal Finance Belongs in Schools
Learning about personal finance may be the most important subject you didn’t study in high school. In fact, financial literacy is as important as mathematics, science or language skills, the 3 pillars of our education system. Imagine finishing high school and already being in the habit of budgeting, saving regularly and spending wisely. By now, you would have thousands of rands invested and you would be more financially savvy making decisions that would positively contribute towards your future.
However, most of us have been forced to learn the hard way.
We have routinely used the over-draft banking facility offered by our banks; we have overspent on credit and have short-changed our retirement savings.
During my career, I’ve come to appreciate one fundamental truth and that’s Personal finance informs everything in your life. Without mastering this skill, you’re simply wasting your own time. A few wrong moves – such as a series of missed credit card payments or purchasing a house you can’t afford – can dramatically narrow your options and make it next-to-impossible to live the life you imagined. Financial literacy is also crucial for avoiding the marketing tricks and gotcha fees that banks and other lenders are notorious for charging less-than-savvy customers.
Financial literacy is a core life skill for participating in modern society. Children are growing up in an increasingly complex world where they will eventually need to take charge of their own financial future. As young adults learning to live independently they will need to know how to budget, make wise financial choices for everyday living and manage risks. Who’s teaching them to do this? Financial products and services vary widely and, in the case of credit, can be almost too easily accessible for many of today’s young people. At the same time, these products and services are becoming more complicated and the choices more difficult.
Adding to this complexity are economic and technological developments which have brought greater global connectedness and massive changes in communication and financial transactions, as well as in social interactions and consumer behaviour.
Parents also struggle with financial literacy
South Africans don’t understand the basics. Many adults, struggle with simple concepts like spending less than they earn. It is this shame, this crippling failure or lack of understanding of money management that continues to make this subject a taboo in so many homes. I believe that we can realise and recognise that parents haven’t done a very good job of teaching their children. Our rising debt levels help prove my point. This growing consumer debt reflects a laissez-faire attitude to borrowing, and with many adults failing to manage their money well, it’s hardly surprising that most kids don’t grasp the fundamentals of spending, saving and sharing.
We spend too much money we don’t have. Economists have been sounding the alarm about consumer debt for the last few years. It is also a recurring mantra from our finance ministry. We’re quick to judge the negligence of the state with regards to their finances yet many of us would be ashamed if our financial life was published on the front page of any newspaper. Forgive yourself for not knowing what you don’t know but this proves my point of why financial literacy should be taught in schools.
What can be done
One must first admit that there are significant barriers to overcome: lack of political will, lack of resources and materials, overcrowded curricula and insufficient expertise. There is no single recipe for success, but we need to start. Countries that have made the most progress have adopted the guidelines supported by the Organisation for Economic Co-operation and Development (OECD) and its International Network on Financial Education (INFE): Financial education in schools should be part of a co-ordinated national strategy.
Sadly, we are not one of the countries who have adopted to adopt their guidelines and I really don’t understand why. Our education system continues to become more archaic each year and we must question what we’re offering the world apart from natural resources. We should also be aware that we may not be able to form part of this 4th industrial revolution we always hear of.
The strategy proposed by the OECD says that a learning framework which sets out goals, learning outcomes, content, pedagogical approaches, resources and evaluation plans must be created and adhered to. The framework must be national and needs a sustainable source of funding which should be identified at the outset. The OECD also emphasises that financial education should start as early as possible, ideally from the beginning of formal schooling, and carry on until the end of the students’ time at school. Teachers should be adequately trained and resourced, made aware of the importance of financial literacy and relevant pedagogical methods, and they should receive continuous support and training to teach financial literacy.
A life without financial literacy is a regretful one
As a country, we’ve seen where a lack of personal finance education can lead. Millions of South Africans struggle every day with their money, living pay-cheque to pay-cheque and relying on credit cards for necessities. Beyond that, many South Africans are finding that they can’t buy homes, invest for retirement, or save for their child’s education because of their own personal debt, massive car payments, and general lack of financial planning.
But it doesn’t have to be that way.
A lot of the money problems South Africans face can be avoided if financial literacy was taught earlier, in school. That’s why I believe all schools should offer financial literacy courses as part of their graduation requirements. This should be made a human right.
Anyone who’s ever struggled with a difficult class in high school has asked the question, Will I ever actually use this stuff after I graduate? Financial literacy is very relevant to your current quality of life and the question to, “Will I ever actually use this stuff after I graduate,” is yes.
Handling money is a skill. Your quality of life will be highly dependent on using your money wisely, rich or poor. So why is it not being taught in schools? Why is it not a fundamental requirement for you to receive a pass in Matric?
Mduduzi Luthuli is an Investment Manager at Luthuli Capital, a Pan-African multi-specialist firm that offers an independent global approach to a wealth-management portfolio. He specialises in building Equity, Fixed Income and Balanced Portfolios.