The Cost of a ‘Misspent Youth’

Its not a safe bet anymore

Where did you learn about managing money? Chances are not at school and probably not really at home either. For most of us learning about finances happened on-the-job through the school of hard knocks and, when it comes to money, those hard knocks can leave you punch-drunk… and broke.

It’s a problem, especially in South Africa with its unemployment rate hovering at around 28% (almost 60% of which are between the ages of 18 – 34). The best way to ensure you get employed is by studying further after school, so the conventional wisdom goes, but have you seen the fees charged by Tertiary Education Institutions? It is expensive, very expensive. So, the only way many young South Africans can pay for their education is through Student Loans. The idea being that, since getting a degree will supposedly guarantee you a job, it means that lending you money now is a safe bet because in the future you will be able to pay it back. Sounds reasonable you think. Maybe, but take a step back and think about this. Essentially young people are being encouraged to go into debt so they can learn skills to help them get a job which, it turns out, is exceedingly difficult to land. Add to this the fact that almost every industry, and the economy, is being disrupted by a barrage of technological developments and innovations which, to some extent probably means that students are paying for degrees with debt that are not going to adequately prepare them for the future workplace. That conventional wisdom is feeling more and more like an old wives tale actually.Don’t just Legislate, Educate!

So, let us revisit the implications of financial illiteracy. Research shows that South Africans (at all levels) are generally financially illiterate, compared to most other nations. How is it that we have not been able to see to it that all children are taught financial skills from an early age at school? Does being financially savvy and secure not form the most basic foundation of one’s whole entire life? Sure, knowing your geography or history is important, or being able to do algebra or to paint, but how can financial literacy not be given at least the same level of importance in education? It does not make sense.Our financial institutions are quick to point out that South Africa has some of the best and most sophisticated credit management systems in the world which is ably underpinned by the National Credit Act. Yet, these same institutions have no qualms in extending credit and essentially indebting youngsters not only through Student Loans but also by providing them easy access to credit cards. Through the thin veil of checks and balances, a young student can, simply by presenting his or her student card and completing the necessary paperwork and presenting proof of ‘regular income’ which is most often simply allowance deposits, apply for and be given a credit card. Sure, everyone has the right to credit, but in the context of a largely financially illiterate population, it still seems irresponsible to extend credit so in conscionably.

The System is Broken

The solution?

Yes, it is complicated, and one can surely point to historical inequality, a disproportionate distribution of resources and wealth as well as the problems inherent when educators themselves probably lack financial skills themselves and therefore are not able to effectively teach others.There is no denying it though, the system is broken. Education is key, surely, and with it a commitment to being honest with our youth. Getting a matric or even a degree is not going to guarantee you a job. To really fix it we need to do something about unemployment and, it seems abundantly clear, internationally, that Governments are not the ones to solve that problem or to create jobs. Even big corporates, the stalwarts of secure employment, are restructuring and retrenching people left, right and center. In a modern connected and disruptive environment, employment is going to be driven by small and medium enterprises.

Similarly, financial know-how and literacy are also not going to, in the short term, be solved by Government Institutions. Here too, small and medium-sized businesses are the ones making a difference and creating real impact.Your Passport to Financial Freedom, Kudough Credit Solutions, is one such business. Kudough has assisted thousands of South Africans of all ages and socio-economic levels to get better at credit by understanding how to wisely and effectively use credit. School-leavers, Students and young people, in general, can benefit from Kudough’s deep experience in credit and debt management to help them shape a better and more healthy financial future.The foundation of anyone’s financial life is your credit report. This is the cornerstone that your entire financial life is built upon. Obtaining and maintaining a good credit score from a young age is essential to instilling good financial habits and, when the time comes, to securing the best possible interest rates when having to purchase big ticket items such as a vehicle or a place to stay. Unfortunately, debt has become a way of life in South Africa simply because it is so prevalent. In many other countries, debt and poor credit is actually frowned upon, which may seem harsh, but if ever you needed an example of positive peer pressure, that may just be it.

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