In South Africa, the household head (often the man of the family) has traditionally been responsible for day-to-day money management decisions. In today’s world, most women contribute to households or head them themselves.
A 2020 Baseline Survey by the Financial Sector Conduct Authority (FSCA) revealed that only 52% of South Africans are financially literate, and 42% of households are female-headed.
Therefore, financial literacy is an essential life skill to secure a stable financial future and secure self-independence.
According to the annuity.org website, the definition of financial literacy is the knowledge of:
- Budgeting
- Savings
- Investing
These enable individuals to make informed decisions about personal finances.
The five principles of financial literacy are:
- Earnings
- Savings
- Borrowing
- Spending
- Protecting assets
The first step is therefore financial knowledge, followed by financial behaviour and financial attitude. Financial literacy is then the foundation for self-empowerment and long-term security, resulting in:
- Living a balanced life and appreciating the better and more luxurious things in life
- Better physical and mental well-being and better healthcare
- Enabling you to buy preferred products and services in accordance with your needs
- Using your money to move forward and improve your ability to be an entrepreneur, as it leads to better access to capital
- Improving your self-confidence and leadership skills
Keep in mind that money does not directly buy you happiness, but it certainly gives you the means to fulfil your dreams. Money in itself is neutral, but it is our actions and attitude that determine wealth if we use it in a constructive manner. Having money, therefore, does not directly translate into happiness!! Keep in mind the negative side of money, which leads to corruption, greed, and inequality.
The following pitfalls should be avoided when investing:
- Fear of missing out on investing
- Ignoring portfolio diversity (spreading investments)
- Holding onto losers due to an inflated ego
- Confusing trading with investing
- Being overenthusiastic with ‘hot tips’ when investing
- Not having an exit strategy
Being financially illiterate can also result in creating unsustainable debt, which can result in a poor credit rating. You could also become a victim of fraud because you are more gullible and believe fraudsters who sell you an illusion to make a quick buck. Financial crime is not just growing; it is mutating.
If it is too good to be true, it is not, and living up to the Joneses is also a trap, especially for financially independent, literate women.
Auguste (Gusti) Coetzer is the CEO of People Power Placements (Pty) Ltd.
