Have fun - South Africans nor money wise - survey

A new survey finds that most South Africans are not financially astute, writes Nalisha Kalideen

The majority of South Africans borrow money or take out loans mainly to feed themselves and their families. And those who have extra money to put aside do so specifically so that they can buy food with it.

These are just two of the results of the FinScope 2005 survey, conducted on behalf of the FinMark Trust between June and August. The poll involved almost 4 000 face-to-face interviews with people aged 16 and older.

When researching issues of debt, the survey found that 89 percent of South Africans hated owing money to anyone and 79 percent thought that taking out loans should be avoided as much as possible.

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However, the survey noted that the main reason why black and coloured people borrowed money was to buy food when their own money had run out.

This was of concern, as it implied that the loans were "not necessarily being taken out for asset purchase, but for basic necessities".

This contrasted strongly with the main reason why white and Asian people borrowed money - which was to buy a car.

In addition to this, the survey found, white people also borrowed money to buy a house, while the rest of the population borrowed money to pay for water, electricity and school fees.

The survey found that, of those people who took out loans, just over half (52 percent) borrowed the money from their family or friends.

"This indicates a strong dependency on an informal network for lending purposes, possibly a function of an irregular income or a lack of access to more formal lending facilities," it noted.

Asked why they didn't borrow money from a bank, almost half (49 percent) said they couldn't afford to - implying that they couldn't afford the monthly repayments.

Alternatively, people borrowed money from microlenders or obtained cash-shop loans.

The survey noted that, while people understood the problems associated with being in debt and the additional costs involved with it, many were driven to taking out loans to cover their basic needs.

"Affordability is clearly an issue when borrowing money, illustrated by the fact that many people prefer (or simply have little choice but) to borrow money from family and friends, rather than through an institution."

The survey found that a majority of adult South Africans were not financially astute, and that more than half did not have bank accounts or the means with which to open one.

And, while South Africans generally realised the importance of saving and investing money, it was not a priority for the majority because they did not have enough money remaining after covering basic necessities.

The survey found the priority for most South Africans was their basic need for food, shelter and employment, and that an understanding of financial services did not form part of their day-to-day thinking.

"Knowledge of key banking-personnel and bureau-assistance terms is low: 'ombudsman', 'underwriter', 'broker' and 'credit bureau' are terms that few understand," the survey noted.

It found that only half of all South Africans knew what a credit card was.

"There is clearly work to be done in terms of increasing knowledge of financial terms among the broader population.

"However, the context in which people live must be taken into account: basic human needs are still a priority for most. This brings into question how relevant financial literacy is at this level," the survey states.

About 60 percent of people prefer-red to get financial advice from family and friends before making a final decision on their finances rather than relying on the advice of a financial expert.

But, at the same time, South Africans seemed to want to learn more about managing their finances, with the two most important issues being how to save more money and how interest rates work and are calculated.

There was clearly a "desire to save and to learn how to save", the survey noted.

People also wanted to know how to draw up a budget and manage it effectively, and how to make use of technology to manage finances better.

The survey noted that it was mostly black people and younger people who were interested in improving their knowledge about finances.

"Significantly, more whites were not interested in improving their knowledge in the financial areas shown to them.

"These people also tended to be older. Perhaps they feel they are knowledgeable enough or have less interest in the topic," the survey found.

  • This article was originally published on page 19 of Daily News on October 27, 2005

Article by: Nalisha Kalideen - www.dailynews.co.za/