There are many different “money personality types” in the world. While some of us are rigorous savers who exert careful control over our finances, others among us are financial ostriches who prefer to “keep their head in the sand” rather than deal with money matters. Some people are avid investors, others like to keep their finances simple. Some people are goal-setters, others tackle expenses as they come. There is a huge array of approaches to personal fiscal issues out there, and a considerable spectrum of financial literacy to consider too.

What is financial literacy?

Financial literacy refers to an individual’s understanding and awareness of finance issues. Just as literacy requires an understanding of letter forms, word classes and grammar, financial literacy requires an understanding of the building blocks behind good personal financial practices.

Why does financial literacy matter?

Financial literacy has been a hot button issue in South Africa for some time, with high levels of personal debt affecting much of the population. Many South Africans struggle to manage their money effectively due to a combination of poor access to financial services and limited knowledge of financial best practice.

This is an issue which is likely to continue to affect future generations, with few school children currently receiving an active financial education. With difficulties in the education system affecting even core subjects such as maths and science, non-curriculum topics such as money management rarely feature in South African classrooms.

If South Africa can start teaching financial literacy across the socioeconomic spectrum, more individuals will be empowered to manage their finances in the most beneficial way possible.

How financially literate are you?

So where on the spectrum of financial literacy do you fall? If you can list all four of the key elements to financial literacy we’ve explained below without peeking, you’re probably well on your way to a smart approach to money.

Perhaps, however, you need to do a little more reading to improve your financial literacy. You can find lots of resources online from charities and from financial companies such as Wonga. To get you started, here are the four elements of finance you need to know about:


Debt refers to money which you have borrowed. This money needs to be repaid to the lender and can accumulate interest over time. In basic terms, interest refers to extra charges added onto the overall amount you will need to repay. Interest can be charged at different levels and increases over time.

Some debt can be beneficial, if it’s used responsibly for helpful purchase which benefit individuals in the long run (i.e. transportation to get to work or education fees). Some debt, however, is bad – especially when it can’t be realistically repaid and it used to fund non-essential things such as holidays and technology.

2. Saving

Saving refers to the money you keep and accumulate for the future. Responsible finance management requires spending less than your income to ensure you have enough money to cover emergency expenses and fund future plans.

3. Budgeting

Budgeting is all about understanding exactly how much you earn and allocating how much you spend on different expenses such as bills, food, clothing, fitness and entertainment. Smart budgeting will allow you to save more effectively.

4. Investing

Investing is about growing your existing finances. Some investments are risky but offer high rewards, others may be safer but offer slower returns. Investments can be anything from stocks and shares, to a property you intend to sell or rent out in future.


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