South African Millennials Face Severe Financial Risk

South African Millennials, also dubbed ‘Afrilennials’, are the largest, fastest growing sector of the population, yet they face stark challenges when it comes to their financial wellness.

The first challenge they face are the well-publicised low levels of financial literacy, a trait that’s endemic across all ages of South African society. Many Afrilennials have a problem understanding basic financial terms and principles. The second challenge they face is the huge number of financial products that are now available to them. This combination has the potential to cause a great amount of financial distress.    

The value of money in a virtual world

As if these challenges weren’t enough to deal with already, even the concept of money is becoming abstract for millennials. They are growing up at a time when money is rarely in physical form. Instead, it is becoming increasingly virtual. Rather than counting out coins and cash, they can make purchases with a simple swipe of a card and can access credit without a second thought.

The ease with which money can be spent often leads to a disconnect from how difficult the money is to earn. The result is that many Afrilennials live beyond their means and subsequently fall into debt.

The habit of saving

With sources of credit readily available, few millennials have developed the essential habit of saving. The first step to saving is understanding the difference between want and need, and this is something many young South Africans are yet to learn.

Let’s face it, saving never has and probably never will be sexy, but it is the foundation upon which the quality of an individual’s life can be improved, whether the money is used to pay for further education or buy a home. Even the very basics of saving, such as these tips from the short-term loan provider Wonga SA, are still not sinking in.

Improving financial wellness

Given the ease with which South African millennials can access information, much of the responsibility for improving their financial wellness levels lies with financial service organisations. Afrilennials currently have very little faith in the impersonal advice provided by financial service providers. They trust people, not companies, which means much of the financial information they read has been written by bloggers and not necessarily those who are providing the best advice.

Financial service providers need to learn how to communicate with millennials in a way that allows them to build a personal relationship with the consumer, who in turn, can develop a healthier relationship with their money. Once that relationship has been built, the basics of saving and the importance of developing a solid financial plan can be communicated.

Do your levels of financial literacy need a boost? What are the most important lessons you’ve learnt? Please share your experiences in the comments below.