The number of young South Africans aged between 18 and 25 has increased significantly in recent months according to a study carried out by the University of South Africa. Much is said about the poor state of financial literacy here in South Africa, and many of the financial institutions are at last taking steps to address this through appropriate courses for the young.
But that is not where the problems start.
The problem starts at home
The lack of understanding about how finance works, (we’re not talking about high finance – just the day to day control of money we all need to know about) begins as many things – at home. Our immediate role-models and our parents, and it is the teaching of this teaching of monetary management that mums and dads fail to pass onto their children that is the main culprit.
In many instances, it is not that fact that parents are simply neglecting to teach their children about money management; they themselves lack the knowledge in the first place. It is therefore essential to gain an awareness of the things your parents did not or were not able to teach you about controlling your finances.
Living within your means
The single biggest cause of young people getting into debt is the fact that many live their lives beyond their means. Yes, some people don’t have enough money in the first place – especially if they are unemployed. But there is also a high percentage of people who do have enough money, but they just don’t manage it properly.
The temptation posed by credit cards
Credit cards can pose a big part of the problem. The fact that young people can buy things on credit and pay later by installments is for some, an offer that is too tempting to be ignored. But buy now and pay later can cause big problems – especially if it’s something that’s done on a regular basis. Before victims release it, they accumulate so much debt that the sum of all of the payments added together becomes too much for their available income.
It’s bad enough when this type of debt is realised for luxury of “fad” items, but when the debt is taken on for necessities like food – that is a potential nightmare. The nightmare has been brought closer to realisation by the growing number of stores like Pick n Pay enabling people of all ages to buy food items using credit cards.
Being qualified for credit doesn’t mean you can afford it
Living within your means is all about being able to afford to pay your bills and debts without a problem. But when many people find that they qualify for a particular credit card, they sometimes make the mistake of believing that this so-called “qualification,” is the same as being able to afford repayments. It is not.
The firms that offer these cards to people without carrying out the proper credit-worthiness-checks are acting totally irresponsibly.
Learn the art of budgeting
The critical thing with managing your money supply is budgeting. Without proper budgeting, you do not know how much money are spending on a regular basis, or what you are spending it on.
Create an affordable budget and acquire goods and services within that constraint and you won’t go far wrong.