Financial literacy: are we equipping our future leaders?

MG Seota (JSE)South Africans are notoriously poor at managing personal finances wisely. Malome-Gibson Seota blames the education system for this problem. He reckons more attention should be paid to understanding compound interest and other factors that play a role in financial decision-making. Malome-Gibson Seota worries that if more isn’t done soon, another generation of young adults is going to miss out on opportunities to improve their wellbeing and, ultimately, the financial health of the country. Instead of playing around in art class, let’s get children working more on real-life money situations using calculators, filling in forms and generally getting to grips with the mind-boggling jargon they will face in the grown-up world, he argues. – JC
By Malome-Gibson Seota*

The current state of financial literacy in South Africa is saddening. Financial literacy, in terms of investopedia.com, is: “The possession of knowledge and understanding of financial matters.” And the places where people (primarily) obtain knowledge are schools.

At school, “the system” teaches children how to apply FOIL correctly, how to analyse (or rather memorise) a Shakespeare play and even how to imitate the stroke of a Picasso painting. But what schools fail to show children is basic financial literacy, such as the effect of putting away R100 a month in a unit trust for 25 years. Now, this is not a jab at the already bleeding nose of the Education Department. I’m merely sharing my observation of our education system.A South African child holds a 50 rand note July 2. The rand sank to a fresh low against the dollar i..

You don’t have to go far to see evidence of the lack of financial education in our society. Case in point is the micro-loan industry (better known to some as the ABIL decline).

The main reason that African Bank’s (ABIL) financial model failed is because the bank did not conduct comprehensive background checks on the people it was lending money to. Now whether this was due to a cost vs benefit issue remains to be seen. However, I’m confident that had their clientele been more educated on the workings of compound interest, ABIL’s books would cary far less bad debt.

Instead of feeding customers an alphabet cocktail consisting of terms like FICA, FAIS, RICA, and CPA, we should be focusing on educating people (and particularly children) about what all of these really mean.

One option could be a more effective use of the life skills curriculum. Time could be set aside for teaching a child how to fill out a deposit slip or how to obtain business finance for a potential business venture. Now I understand that the school system is currently pre-occupied with getting our mathematics and science numbers up – and I don’t want to take time away from that.

So if we can’t teach our children at our schools, let’s at least make an effort to educate them in our homes – which is the alternative option. If parents could be more open with their children about financial matters, instead of waiting for them to make the mistakes themselves, the state of financial literacy would improve drastically.

Picture a family (parents and children) starting its Saturday by speaking to its financial adviser about how an increase in interest rates affects car repayments. Then imagine the family speaking to a bank regarding obtaining a mortgage for their investment property, and the day ending with the parents teaching the child how to fill out a deposit slip correctly (which, let’s face it, is tricky the first time). Wouldn’t this allow our children to become wiser and more knowledgeable?

Every parent wants the best for their child. So we, as a society, need to give our children the opportunities that we never had. I believe firmly in the quote “It takes a village to raise a child” and think, that through our combined effort, South Africa will be in good hands. The leaders of tomorrow are eager to learn, but they need to be given effective tools in order to mould our nation.

It really doesn’t take much effort to educate a child to be financially alert, especially if we have gone through experiences which allow us to do so. For me, it meant sitting with a first year student and showing them how to prepare a budget. For others, it could be allowing a child to generate a savings plan in order to buy those shoes he or she wants. The only thing that matters is that we take persistent action.

And if you’re sitting there thinking that you can’t make a difference, just remember that “even a small candle can burn a bridge.”

References: http://www.investopedia.com/terms/f/financial-literacy.asp Accessed 09/09/2014. Available, 17/05/2009

http://www.iol.co.za/business/companies/african-bank-needs-deposits-as-model-fails-1.1734787#.VBB9YPmSyAU . Accessed 09/09/2014. Available, 13/08/2014

http://www.enca.com/african-bank-will-prove-adage-history-repeats-itself . Accessed 09/09/2014. Available 21/08/2014.

* Malome-Gibson Seota describes himself as a social entrepreneur (in training). He was Deputy Head Boy at Cornwall Hill College and studied Bcom (Accounting Sciences) at University of Pretoria (Tuks).  Whilst at Tuks he mentored first year students, worked in the financial department of the charity organisation, RAG (Reach out And Give) and played in the Tuks soccer team. He taught myself how to trade in the stock market. He is an articled clerk at SizweNtsalubaGobodo (SNG).

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