Financial education can guide through tough times
Thembisa Mapukata, Old Mutual executive for foundation markets says that there are around a million domestic workers in SA and many of them have a daily battle to make ends meet.
“There may be no instant cure for the cycle of generational poverty, but accessible financial education is a vital first step.
“Learning how to avoid the pitfalls of debt with insights from Old Mutual’s On the Money programme can help women to strengthen their financial future,” says Mapukata.
She says that like many struggling South Africans, these hard-working women earn meagre wages and many spend around a third of their earnings on commuting. Under those circumstances it’s understandable that they may feel they’re unable to save for something as seemingly distant as retirement.
“The problem is that living hand-to-mouth traps successive generations of families in a cycle of poverty. Worse, many breadwinners are preyed on by loan-sharks and spend years, and thousands of rands paying punitive interest rates on these loans.”
Mapukata refers to the old saying that there are two kinds of people in the world: “Those who earn compound interest and those who pay it”.
Sadly, many poorer working South Africans spend their lives in the latter category.
That drain on already modest earnings can result in breadwinners being unable to save for their own retirement or their children’s education. This can in turn harm those youngsters’ prospects for earning good money.
Apart from dashing the dreams of many young people, this cycle of generational poverty can affect entire communities. She adds that employers have a role to play here.
“If you’re a caring employer, you need to ensure your employees are empowered to provide for themselves,” she says.
The most recent Old Mutual Savings and Investment Monitor (OMSIM) found that over half of mothers surveyed regard themselves as single mothers. Around a third receive occasional support from their children’s fathers, but even so there’s immense pressure on those women.
OMSIM also found that while 37 per cent of parents with dependent children are saving for their children’s education, 55 per cent have no idea what that education would cost.
But the costs are significant. Education inflation is around 8.1 per cent, much higher than the official inflation rate. That means, for instance, that a three-year university degree that costs about R177 000 now could cost about R4.1-m 10 years from now.
“The single most important factor in providing your kids with a bright future is to start saving early, preferably the day they’re born. This is likely to ensure you have enough money by the time they start school,” adds Mapukata.
Old Mutual’s free on the Money financial education programme helps South Africans, of any income-earning ability, to manage their money better.
It uses the behaviour of SA’s Big Five animals, lion, elephant, leopard, rhino and buffalo, to explain good financial habits.
