Lack of knowledge a barrier to financial freedom Publication info: The Daily News ; Durban [Durban]. 22 Mar 2019: 14.
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FULL TEXT ALTHOUGH financial freedom may mean different things to different people, being debt-free, gaining financial
independence and feeling a sense of financial stability are all commonly listed components of this coveted liberty.
The reality is that most South Africans will never experience any of these comforts. Research conducted by Unisa
in collaboration with Momentum shows that 60 percent of the nation is unable to afford an emergency expense of
R20 000 and only 6 percent can retire comfortably.
In the light of Human Rights Day, Jeanette Marais, the chief executive of Momentum Investments, says the
financial services industry has a responsibility to educate and inform clients and the broader public.
“It is important to remember that most South Africans are taking care of people other than themselves. The
sandwich generation, which refers to individuals in their 40s and 50s who not only have to look after their children,
but also take care of their elderly parents, is particularly relevant.” Everyone has to make the most of the money
that they have.
Although it is a privilege to be able to help your family and even extended family financially, Marais says it is also a
reality for a lot of economically active young people that the money they earn is not their own.
“When starting out on their financial journey on the income ladder, the personal financial planning of these young
people is more complicated and as a result they cannot immediately start saving or investing in their own future.”
There are also positive legacies in the country, she says.
“Informal savings activities, such as stokvels, can be very lucrative when managed correctly, and individuals who
take part in these mostly spend their ‘pay-outs’ well. The problem, in terms of reaching financial freedom, is that
informal stokvels are typically short term and do not get invested formally to gain interest. This often means that
they do not reap the rewards of a long-term investing strategy that is geared for a specific goal or outcome.
“Informal savings vehicles are not regulated and the participants miss out on the benefits they would have gained
from the formal economy, such as earning interest, dividends, or being able to take out loans against their
investments and growing their personal wealth that way,” she said.
Marais believes that South Africa must continue to try to break down the barriers that are holding people back
from reaching their financial freedom.
“The low minimum wage, high rate of unemployment and restrictive historical financial legacies, for both race and
gender, are all major barriers that still stand between many South Africans and their financial freedom. Today, of
all the asset managers in South Africa, only 18 percent are women and 16 percent are black. The more inclusive
the society is, the better it will be for the economy.”
While these macroeconomic barriers are going to take some time to break, there are some common
misunderstandings and misconceptions that if demystified will at the very least begin turning the tide for many
hard-working South Africans who may be closer than they think to reaching their financial freedom, she says.
The first of these is the misconception that a person needs to earn a lot to be able to save.
“Many people do not understand the difference between saving and investing, so they don’t realise that, even with
a small amount, such as R50 a month, one could start saving to build up a big enough amount that they could one
“A recurring investment could also be a small amount, such as R500 a month. The important point is that people
should start somewhere – the sooner the better – and too often they are not aware of that,” she says.
Many people also do not understand the financial services products they own, says Marais.
“As a result, they do not know how to make the most of the benefits available from these products, and they do not
have plans to provide for the best po