South Africa’s overall financial literacy score – 54 percent – is not distressingly low, but it conceals gross inequalities in financial literacy in South Africa.

This is according to the results of the first national survey of financial literacy in the country.

The results indicate that people with a low living standard have significantly lower financial literacy levels than people with a medium living standard and that financial literacy levels increase significantly as the level of schooling increases. In other words, wealthy and educated South Africans are inclined to score higher than those who are poorer and less educated.

The aim of the survey, commissioned by the Financial Services Board and carried out by the Human Sciences Research Council, was to assess the levels of financial literacy and the knowledge and understanding of financial systems in South Africa.

Financial literacy refers to your ability to understand your finances and make informed decisions about using and managing money.

The survey was carried out in September and October last year. A representative sample of about 3 000 South Africans took part.

The overall score is made up of scores measuring financial control, financial planning, financial knowledge, and product choice.

* Financial control covers personal involvement in money management at household level and the ability to stay within a budget.

Less than half (44 percent) of respondents reported having a household budget and 43 percent of these indicated that they sometimes or never stay within their budgets.

Only half of respondents indicated that they usually pay their bills on time, but 44 percent indicated that during the past 12 months their income did not cover their living expenses.

To make ends meet, the majority (56 percent) of respondents said they would borrow food or money from family or friends, and just over a third would cut back on expenditure or do without certain items.

* Financial planning refers to making provision for emergencies and retirement. Two-thirds of respondents said they would be able to cover expenses for three months in case of an emergency, suggesting that “a majority of South Africans have small reserves that they could use to fund living expenses during prolonged times of income loss”.

When it comes to planning for retirement, nearly half of respondents included state old age pensions in their retirement plan. Only 33 percent included an employer pension in their plan.

* Financial knowledge assessed people’s familiarity and proficiency with basic financial concepts.

When respondents were asked what issues they would like to be more informed about, “the most important knowledge gaps involved savings, budgets and insurance”.

* Product choice assessed the respondents’ awareness of financial products. The survey shows that people commonly know more about insurance products than credit and loan products or investment and savings products.

Most (55 percent) of respondents reported having none of the savings or investment products listed, despite high levels of awareness of pension funds and stokvels.

Ingrid Goodspeed, chief director of financial sector development at National Treasury, says the national consumer financial education committee chaired by Treasury is developing a strategy to improve financial literacy levels by focusing programmes where they are needed most.

Meanwhile, this week the South African Savings Institute (Sasi) issued a reminder to consumers to be cautious about their spending this festive season to avoid financial stress in the new year.

Bonuses should be used to settle debt or save for retirement, says Prem Govender, chairperson of Sasi.