One of the most striking things that I experienced when I first visited the United States of America (USA) was the high levels of financial literacy amongst ordinary citizens. I landed at the JF Kennedy International Airport in New York and met with Rob, a Black American taxi-driver, who drove me from the airport to Sanctuary Hotel in 47th Street (not very far from Wall Street). Our conversation during the 30 minute drive to Manhattan revolved around investments and various global trading platforms. Rob indicated to me that he was making use of some of the income he made from his taxi business to invest in soft commodities. I was indeed impressed by his knowledge of various investment platforms available to him at a personal level.
Improved Financial Literacy promotes a savings and investing culture
In Africa, the picture is very different and there is a growing need for financial literacy. One of the key problems being experienced by most communities in Africa relates to limited access to financial services. The main reasons for the large unbanked population in Africa is geographical inaccessibility and poor infrastructure, with many of the unbanked living in remote rural areas. This, combined with the high cost of banking services and a lack of financial education and understanding, creates very high barriers to banking for poor rural populations. While there are a number of developments such a mobile money, the quality of financial inclusion and literacy levels remains weak. There is also a lack of basic financial planning knowledge in areas such as budgeting and retirement planning.
Taking South Africa as a case study, research done by the Financial Services Board (FSB) shows that paying money into a bank account is the most popular form of saving amongst most South Africans. Only 4% of South Africans invest in trusts, stocks, shares or property as a form of saving. Approximately 51% of South Africans possess no investment or savings products. On the other hand, financial markets in South Africa have been deepening over the years, with new complex instruments being introduced and being traded. More recently, South African citizens have experienced an economic recession and rising costs of living. Overall, this calls for a need to improve financial literacy within the general populace so as to improve participation in investment markets and assist in developing personal investment strategies. In this environment, having a dedicated financial advisor to assist in the financial planning process could prove to be a very wise decision.
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