South Africa has come last in a poll of 30 countries and economies – drawn from Africa, Asia, Europe, Australasia, North America and South America – when measuring financial knowledge.
According to the the Organisation for Economic Co-operation and Development (OECD), adults in many countries around the world display low levels of financial knowledge, fail to engage in financial behaviours that could improve their financial security, and have financial attitudes oriented towards the short-term.
The OECD/INFE International Survey of Adult Financial Literacy Competencies questioned 50,000 people including 2,813 South Africans aged between 18 and 79.
It found that average levels of financial knowledge show room for improvement. On average, just 56% of adults across participating countries and economies achieved a score of at least five out of seven, considered to be the minimum target score.
South Africa was at the bottom of the list, scoring around 30%.
Only 42% of adults across all participating countries and economies are aware of the additional benefits of interest compounding on savings, and only 58% could compute
a percentage to calculate a simple interest on savings.
Only about two in three adults –across OECD and all participating countries and economies – were aware that it is possible to reduce investment risk by buying a
range of different stocks.
Low levels of numeracy may be further reducing the ability of individuals to make sound decisions by applying financial knowledge.
Responses to a question asking people to calculate the balance of an account after 2% interest has been added, suggest that a sizeable proportion of the population of many countries finds it difficult to apply, OECD said.
OECD stressed that financial knowledge is an important component of financial literacy for individuals, to help them compare financial products and services and make appropriate, well-informed financial decisions.
“A basic knowledge of financial concepts, and the ability to apply numeracy skills in a financial context, ensures that consumers can act autonomously to manage their financial matters and react to news and events that may have implications for their financial well-being,” it said.
On average, a third (34%) of respondents across participating countries and economies
had been unable to make ends meet at some point in the previous 12 months.
Worryingly, just under half of respondents from SA reported that their income did not always cover their living costs, while around a third of respondent said they borrowed to make ends meet.
In South Africa, only one in two (48%) respondents agreed that they pay their bills on time.
See the full report here