By: Nongcali Rubushe
According to Sanlam’s recent Financial Confidence Index, the majority of South Africans are stressing about money and don’t know what to do about it. The 2023 Deloitte SA Investment Management Outlook revealed South Africa’s savings rate sits at only 0.5%, and that 90% of our retirees can’t maintain the same standard of living before their retirement. The JSE’s research into retail markets has shown that the population is highly indebted, with a high debt-to-income ratio and a dismal savings rate.
There’s a direct correlation between all these challenges and the level of comfort and confidence that people have when it comes to savings and investments. Reasons vary ranging from being embarrassed in front of friends and family for having a poor financial status, or feeling inadequate where financial literacy is concerned, particularly in adulthood
Yet countless global studies continue to underscore how developing your financial literacy has positive benefits from making better financial decisions to feeling less anxious and developing stronger personal relationships.
However, it’s incumbent on us as the finance sector to encourage the normalisation of candid and broad conversations around finance because not only do people invest in the things they truly understand, but they also engage better when they are confident and comfortable.
Diversify! Micro-Investments can go a long way
Despite South Africa’s poor savings culture, short-term saving vehicles such as stokvels remain a primary avenue for people to fulfil their financial goals. However, to curb the poor savings culture it’s key for people to explore alternative long-term options for extended financial freedom as well as to build wealth for themselves.
At the JSE, one of our key goals is to make financial literacy accessible to all who need it, as well as showcase the various ways in which the exchange can enable people to grow and diversify their investments, and how small monthly savings can become powerful investments for the future.
Given that micro-investing is a familiar saving vehicle for many South Africans in light of the popularity of stokvels, it can be used as a gateway for novice investors entering financial markets. Most micro-investment platforms offer investment products such as Exchange-Traded Funds (ETFs), which are listed investment products that track the performance of a "basket" of shares, bonds, or a single commodity. These instruments offer convenience and flexibility allowing investors to make monthly contributions or a once-off lump sum, depending on the investor’s needs.
From the cradle to prosperity
Entrenching financial literacy at grassroots levels is pivotal to shifting the needle for the next generation. Financial literacy ensures that young people have equitable access to a fundamental life skill that will be key to determining the financial outcomes of their lives.
As financial literacy gains recognition in societal conversations, there remains a gap in establishing a mainstream and structured strategy targeted at the youth to guarantee that every young person in South Africa has an equal opportunity to acquire these essential skills.
To effectively address this gap, the JSE has been running the Investment Challenge for 51 years which is our flagship programme that aims to teach South African high school learners and higher education students about investing on the JSE. The game allows young people from across the country to invest in a virtual trading environment, learn about the stock market, compete against each other, and as an incentive, stand a chance to win monthly and annual prizes.
Keep talking, keep researching
It's these collective small steps that are building blocks towards a financially literate and economically inclusive society. Importantly, to continue to demystify savings and investments, as well as address the current savings culture, it’s critical to make the topic part of our everyday conversations – much like the latest social media trends or car models. It’s through this discourse that feelings of shame, discomfort and inadequacy associated with financial matters can be dissolved.
What is equally important is that investors need to seek educational information to set a foundation for their investment journeys to enable them to make informed decisions. When we feel educated and equipped, we feel confident and are able to navigate matters effectively.
A solution that we as the JSE have put in place in this regard is to make educational modules available – there’s a plethora of free content available on our website aimed at helping people learn how to invest. The content ranges from what are shares, what are dividends, and types of bonds, to name a few.
To put this information into practice in a risk-free, simulated environment, investors can engage with the Virtual Trading Game (VTG), a programme for South Africans of all ages. The VTG helps those participating to learn about the fundamentals of investing and encourages them to research and strategise around trading of JSE listed instruments.
The final step to bring the information and education to life, investors need to consult with qualified financial markets experts such as stockbrokers or financial services providers. A list of authorised brokers can be found on the JSE website. In the event that investors engage with brokers or FSP’s independently, they can verify their authenticity via the JSE’s Verify a Broker tool.
* Rubushe is the head of retail at the Johannesburg Stock Exchange.
PERSONAL FINANCE