Financial education is everyone’s responsibility
10 October 2019 David Kop CFP®, Executive Director of Relevance at the Financial Planning Institute of Southern Africa
South Africa is in the midst of a savings crisis – we simply don’t have enough money to last us in retirement. The best chance of correcting the situation is if industry players and professionals work together to give more people access to financial education.
South Africa’s seemingly endless political upheaval is doing real damage to economic growth, but we can’t blame politicians for everything. On both a personal and professional level, we’re not doing nearly enough to ensure that the majority of people have sufficient capital to last when they stop working.
The numbers are frightening. Ideally, you should have enough capital to generate at least 75% of your final paycheck as income in retirement, escalating annually at the inflation rate, but a recent Sanlam survey demonstrated that only 8% of South Africans achieve this – and the actual income replacement ratio is closer to 40% of final salary. Throw in the results of a MyTreasury survey and it gets worse: 62% of us don’t reinvest retirement savings if we’re retrenched or if we change jobs; 38% of us don’t seek retirement advice and 90% of people with pensions don’t monitor their investment after signing up.
The only way to change this is through financial education, but there are problems here, too: While most industry bodies have financial literacy programmes, there’s no unifying message or input from professionals, and the overall outcome is therefore diluted and ineffective.
The Financial Planning Institute of Southern Africa (FPI) launched MYMONEY123™ in 2012, to broaden general financial literacy in communities where the situation is most dire, considering the critically high unemployment rate and the reliance of extended families on a single income. The course openly communicates why you should budget, why you should limit credit and how you can ultimately develop a positive savings culture, thereby kick-starting a conversation among participants about what they’re doing with their money and how they can do better.
Research backs up the effectiveness of the programme: For his Masters degree in Local Economic Development through the University of Johannesburg, Tshepo Letebele interviewed groups of mineworkers in Welkom about their perceptions of saving after having completed the MYMONEY123™ workshops. More than 80% of participants indicated that they were likely to try and save more, and 91% would recommend the programme to others.
The workshop content is indeed excellent, but the programme cannot exist in a vacuum. The only way to get more people involved is if all the FPI’s professional members assist. If every CERTIFIED FINANCIAL PLANNER® used his or her network to identify one suitable group of 30 people per year, MYMONEY123™ would reach 150 000 people. Multiply that by seven years and more than a million people would be empowered to make better financial decisions.
Politics can change on a whim and the economy will move through many more cycles of spikes and dips. Only by saving through the cycles is there hope for economic freedom in South Africa – and the only way to create a culture of saving is through education and sharing of knowledge.
Reaching a million people in seven years is an inspirational idea – it might be the shot in the arm that the industry needs for a unified approach to financial literacy. Let’s all get behind the FPI and the MYMONEY123™ programme, and let’s make financial education available to everyone.
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The Financial Planning Institute of Southern Africa (FPI), a South African Qualifications Authority (SAQA) recognised professional body for financial planners, which serves the public by ensuring that people who carry the CFP®
designation are qualified, experienced and professional. FPI has recently been approved by the South Africa Revenue Service (SARS) as a Recognised Controlling Body (RCB).
The Institute is also recognised internationally and is a founding, and a current affiliate member, of the international Financial Planning Standards Board Ltd (FPSB)
based in the USA, along with 25 other affiliate member countries who offer CFP®
certification, the highest recognised professional designation worldwide for a financial planning professional. For more, visit www.fpi.co.za
or follow @FPISANews.