Tough financial literacy made easy and fun

Johannesburg – Financial services group Sanlam has come up with a creative way to up the financial literacy of South Africans.

The company will flight Sanlam Moola- Money Family Game Show on eTV from next month, a show that uses the medium of entertainment to improve financial literacy levels.

Sydney Mbhele from Sanlam outlines some of the financial blind spots that many South Africans share:

• Sanlam’s spot research suggests many people do not know the interest on their savings products or how this relates to the current repo rate (the rate at which the Reserve Bank lends money to commercial banks).

The current rate of 3.5% is great for those paying off bonds, but it also brings down savings and investments interest rates. It’s important to be cognisant of this and consider compensating by upping your savings and investment contributions.

• According to a recent Sanlam survey, many South Africans (45%) report spending more money on food since the pandemic’s start, with several reporting an increase in take-aways.

Conversely, 21% report cutting back on saving for retirement. While the need for small spoils is understandable, it’s also wise to be wary. It’s difficult to prioritise your future self over short-term wants if you don’t set specific savings goals.

That’s where seeking expert guidance from an intermediary may be beneficial. Once you have a road map in place, and someone to be accountable to, saving can be a lot easier.

• The pandemic made many people aware of the importance of an emergency fund, plus grudge purchases like life cover.

But does that translate into action? Catalyst’s research suggests it might not. Just 49% of people polled had sufficient savings to cover the bills for three months – 44% for six months. Many cancelled or reviewed financial products over the course of pandemic.

It’s easy to pop one’s head back in the sand and assume this is a once-in-a-lifetime event. But the bigger lesson should be that curveballs do occur, and emergency funds are the best way to bolster resilience and weather the storm, without depleting savings.

• Having sufficient savings to retire comfortably is most people’s goal, but a big blind spot is failing to make adequate provision for one’s health. Having adequate medical aid and gap, severe illness and disability cover can make a massive difference.

• A survey from PayCurve (August 2020) found 80% of South Africans were seeking unsecured loans to cover monthly expenses.

Another survey from DebtBusters (August 2020) reports that the debt holiday that banks offered in March 2020 added R20.7-billion to the debt of about 1.6-million people.

The situation is dire, but an elephant can be eaten one small bite at a time. A common blind spot is feeling overwhelmed and failing to come up with a smart, holistic strategy.

It’s often a good idea to pay off small debts so you can focus on the larger ones. But it depends on circumstances. Consider speaking to an adviser to come up with a plan.

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