Many Young South Africans don’t know how to manage their finances. In fact, more than 50% actually (according to a new study). The lack of proper financial education is causing many to start their lives at an economic disadvantage.
Who don’t they know how to manage their finances?
In an increasingly complex world, financial education has become an essential tool for young people seeking to secure their futures. Although the wider access to information, financial literacy remains a global challenge, with direct implications for the quality of life and economic stability of future generations.
This issue is particularly evident in countries like South Africa, where significant obstacles stand in the way of financial freedom and long-term wealth generation. One of the most alarming points in South Africa is the high youth unemployment rate, currently standing at 45.5%, according to StatsSA.
However, even those young people who manage to secure a source of income often lack the knowledge necessary to manage their money effectively. According to the Youth Generational Wealth survey conducted by 1Life Insurance, more than 50% do not know how to build a stable financial future.
The study specially highlights as an important concern the fact that fewer than 30% of young South Africans have a solid monthly budget. This means the vast majority of young people don’t know how to manage their finances. There’s a lack basic financial planning skills, preventing them from managing their income adequately and securing a safer future.
Siphelele Sokhela, Brand Manager at 1Life Insurance, told The Citizen that this lack of planning is a significant obstacle to young people breaking the cycle of generational debt and ensuring economic well-being for themselves and their families.
Another key finding from the 1Life study is that fewer than 20% have any kind of insurance, posing a significant risk in the face of unforeseen events. “Of those who are employed, only a small portion have the necessary financial protection to deal with emergencies,” Sokhela notes.
The good news, according to Sokhela, is that 80% of respondents are aware they can start generating wealth as soon as they land their first job. However, a lack of proper financial education, along with misconceptions about the available wealth-building tools, contributes to many young people beginning their financial lives at a disadvantage.
A clear example of this confusion is that only 40% of the young respondents consider products like life insurance or retirement plans as means to generate wealth, when both are essential for ensuring long-term financial stability. In this regard, 35% have life insurance, while just 13% have critical illness cover, and only 18% have disability cover.
In addition to structural issues, the 1Life survey also highlights that more than 45% of young people get their financial information from social media, which is concerning. While social media can offer valuable knowledge, it should not be the sole source of financial education.
Young people’s behaviour towards credit is another factor contributing to their financial instability. A report from Experian revealed that young people represent 16.4% of active credit users, with a risky trend of irresponsible retail credit use.
Although the default rate in this category has dropped from 21.9% to 16.8% in the past year, this decline doesn’t necessarily indicate an improvement in financial management among this group. In fact, the reduction is largely attributed to decreased access to credit, meaning many young people are simply unable to obtain new loans.
Similarly, a recent survey conducted by the Financial Sector Conduct Authority (FSCA) and the Human Sciences Research Council (HSRC) found that 49% of South Africans are illiterate when it comes to finances / financial stats. This deficiency significantly impacts how young people manage their finances and make mistakes that can affect their economic well-being.
Among the most common errors is excessive credit use. Many fall into the trap of credit cards and store accounts, leading them to spend more than they can repay.
Another frequent mistake is insufficient saving and inadequate retirement planning, which can have severe long-term consequences, as relying solely on informal investments is not enough to ensure a stable retirement. Lastly, there is a widespread fear and lack of understanding of the financial system.
Additionally, the South African Savings Institute (SASI) warns about the high level of non-essential spending among young people.
According to their research, over 70% of disposable income is spent on entertainment, fashion, and dining out, while a very small fraction goes towards savings and investments. This behaviour limits their ability to contribute to the country’s economic growth in the future.
Most Popular Payment Methods
In South Africa, young people are increasingly adopting digital payment methods, moving away from traditional cash transactions. A report by FinMark Trust reveals that 67% of young South Africans between the ages of 18 and 35 regularly use mobile banking and digital payment platforms.
This trend has been driven by the wider availability of smartphones, increasing internet penetration, and growing trust in online payment solutions, especially after the COVID-19 pandemic.
The most commonly used methods include digital wallets, such as SnapScan and Zapper, and buy now, pay later (BNPL) services like Payflex and MoreTyme.
These platforms not only facilitate transactions but also promote financial inclusion by providing young people with access to financial services that were previously out of reach.
According to Statista, mobile payment transactions in South Africa reached $14.8 billion in 2022 and are expected to grow to $22.5 billion by 2025.
This widespread adoption reflects a shift in consumer preferences, with young people valuing the convenience and security of digital payments. Additionally, a study by PwC confirms this trend, noting that 56% of consumers under 35 prefer digital methods over cash.
However, despite the growing popularity of digital payments, challenges remain. A report from the South African Social Media Landscape notes that only 39% of young people feel confident in their digital financial skills, underscoring the need for greater financial literacy so they can effectively use these platforms.
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