11 years of consumer financial education in South Africa

Measuring Financial Literacy and Capability: Diagnostic Tools to Support Policy Development

Mr Lyndwill ClarkeHead: Consumer EducationRitz-Carlton Hotel Moscow

13 June 2013

11 years of consumer financial education in South Africa

Measurement of Financial Literacy in RSA

Before 2010 – Evaluation per project and programme

2010 OECD Pilot Study

2011 Baseline Study

2012 SASAS

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11 years of consumer financial education in South Africa

Why Measure Financial Literacy?

• Set a baseline – needs/gap analysis

• Influence policies, strategy and programme design

• Impact assessment

• (TO SEE IF CFE WORKS?)

3

Financial Planning

Knowledge & under-standing

Choosing financial products

Financial Control

Financial Literacy

11 years of consumer financial education in South Africa 4

BEHAVIOUR 9 Q

Keeping track of money

Making ends-meet

Choosing & using

financial products

Short & Long-term planning

KNOWLEDGE 8 Q

Simple & compound

interest

Inflation time value of money

Risk and return

Risk diversification

ATTITUDES4 Q

Propensity to save vs

spend

Time preference (present vs

future)

Risk preference

(explanatory variable)

FINANCIAL INCLUSION

Awareness of products

Holding and using

products

Saving habits

SOCIO-DEMOGRAPHIC INFORMATION

Age

Gender

Education

Work

Income

OECD Questionnaire Content

11 years of consumer financial education in South Africa 5

Financial control8(23)

Financial planning

5(18)

Products choice12(63)

Financial knowledge

8 (35)

From Pilot to Baseline to Annual Study

BEHAVIOUR9

ATTITUDE4

KNOWLEDGE8

FINANCIAL INCLUSION

Financial control8

Financial planning

5

Products choice12

Financial knowledge

8

ANNUAL SURVEYOECD PILOT

SA BASELINE

11 years of consumer financial education in South Africa

Study Methodology

• Survey conducted by Human Sciences Research Council (HSRC)• Nationally representative of the population 16 years and older living

in private households in the 9 provinces• Primary sampling units: 500 census enumerator areas (EAs),

stratified by province, geography type and majority population group

• Secondary sampling units: 7 household visiting points randomly selected per EA

• One respondent 16+ years randomly selected per household• Of 3,500 addresses issued 2,518 (2,972 – 2011) interviews

achieved• Responses to the survey voluntary and confidential, collected by

face-to-face interview• Data collection: November-December 2012

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11 years of consumer financial education in South Africa

Financial control

7

Eight indicators: OECD PILOT2010

BASELINE 2011

SASAS 2012

Indicator 1 • Personal involvement in daily household money management

Indicator 2 • Presence of a household budget

Considered Approach to Personal Finances

Indicators 3-5

• Careful spending• Paying bills timeously• Closely monitoring financial

matters

Making Ends Meet

Indicators 6-7

• Making ends meet• Main coping response

Indicator 8 • Preference for spending or saving

11 years of consumer financial education in South Africa

Making Ends Meet

• 45% personally experienced income shortfalls last year– Little difference in response between 2010 and 2012.

• Two common coping responses: borrowing from family/friends (41%); cutting back on spending or doing without (43%) – nominal reliance of financial products.

– Increase in the share of South Africans cutting back on spending as a coping strategy between 2012 (43%), 2011 (35%) and 2010 (30%).

– Decline in the share of South Africans borrowing from family/friends as a response to income shortfall between 2012 (41%) and 2011 (55%).

• Most important coping mechanism for South Africans is cutting back on expenditure or doing without (31%)

– This was primarily a coping strategy is more common among middle income South Africans; the poor are more reliant on social networks

8

11 years of consumer financial education in South Africa

Financial Control Domain Score (2011, 2012)

Male Female16-19 years

20-29 years

30-39 years

40-49 years

50-59 years

60-69 years

70+ years

Black African

ColouredIndian

WhiteLow living standardMedium living standard

High living standard

No schooling

Primary

Some secondary

Matric or equivalent

Tertiary

Urban formal

Urban informalRural, trad. auth. areas

Rural farms

0

50

100

2012 2012 National Average (61)2011 2011 National Average (58)

11 years of consumer financial education in South Africa 10

Financial Planning

Five indicators: OECD PILOT2010

BASELINE 2011

SASAS 2012

Indicator 9 • Tends to set and strive to achieve long- term financial goals

Indicator 10 • Has emergency funds or rainy day funds

Indicators 11 • Preference for spending money vs long-term saving

Indicators 12 • Living for today vs long-term provision

Indicator 13 • Saved money in the last 12 months

11 years of consumer financial education in South Africa

Savings Behaviour

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  2010 2011 2012

Paying money into a savings account 32 28 23 Saving cash at home or in your wallet 22 32 20 Building up a balance of money in your bank account 17 20 16 Saving in a stokvel or any other informal savings club 9 11 7 Giving money to family to save on your behalf 9 10 6 Buying financial investment products, other than pension funds 3 5 4 Or saving in some other way (remittances, buying livestock or property)

2 5 3

None of the Above 26 31 50

Significant majority saved in at least one type of savings instrument Signs of declining ability to save over last 3 years

11 years of consumer financial education in South Africa

Behaviour and Attitudes to long-termplanning

• 52% of the adult population always/often sets and pursues long-term

financial goals; 22% sometimes; 22% doing so seldom or never.

• 39% find it more satisfying to spend money than to save it for the long term

(45% preferred saving and 13% remained neutral)

• 29% reported that they tend to live for today and let tomorrow take care of

itself (53% preferred to plan for tomorrow; 18% remained neutral)

• 42% believed that money is there to be spent (37% preferred to save and

21% remained neutral).

Attitudes have not changed appreciably since 2010.but Signs of declining ability to save over last 3 years

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11 years of consumer financial education in South Africa

Financial Planning Domain Score (2011, 2012)

Male Female16-19 years

20-29 years

30-39 years

40-49 years

50-59 years

60-69 years

70+ years

Black African

ColouredIndianWhiteLow living standardMedium living standard

High living standard

No schooling

Primary

Some secondary

Matric or equivalent

Tertiary

Urban formal

Urban informalRural, trad. auth. areas

Rural farms

0

50

100

2012 2012 National Average (50)2011 2011 National Average (53)

11 years of consumer financial education in South Africa 14

Appropriate product choice

Twelve indicators: OECD PILOT2010

BASELINE 2011

SASAS 2012

Product awareness Indicators 14 -17

• Banking products• Credit and loan products• Investment and Savings Products • Insurance Products

Product holding Indicators 18-21

• Banking products • Credit and loan products• Investment and Savings Products • Insurance Products

Financial product decision making Indicators 22-23

• Have clear idea of product need • Informed Product choice

No Experience of regret about recent financial product choice Indicators 24-25

• Does no Regret any Key Financial decisions made in the last year

• Did not Pay for Unsuitable product in the last five years

11 years of consumer financial education in South Africa

Banking Products

11 years of consumer financial education in South Africa

Main Non-Banking Products

Keep Cash at Home

Funeral cover (undertaker)

Household Insurance

Loan from Friends or Family

Stokvel/Umgalelo/Savings Club

Medical Aid Scheme

Belong to a burial society

Life Insurance

Lay-Bye

Pension Fund

Vehicle or Car Insurance

Store Card

0 10 20 30 40 50 60 70 80 90

13

14

11

10

13

13

23

16

10

12

12

22

46

54

55

56

59

60

60

64

65

66

66

78

Awareness Holding

11 years of consumer financial education in South Africa

Product Choice Domain Score (2011, 2012)

Male Female16-19 years

20-29 years

30-39 years

40-49 years

50-59 years

60-69 years

70+ years

Black African

ColouredIndian

WhiteLow living standardMedium living standard

High living standard

No schooling

Primary

Some secondary

Matric or equivalent

Tertiary

Urban formal

Urban informal

Rural, trad. auth. areasRural farms

0

50

100

11 years of consumer financial education in South Africa 18

Financial knowledge and understanding

Eight indicators: OECD PILOT2010

BASELINE 2011

SASAS 2012

Indicator 26 • Basic mathematical division

Indicator 27 • Effects of inflation

Indicators 28 • Interest paid on loans

Indicators 29 • Interest on deposits

Indicator 30 • Compound Interest

Indicator 31 • Risk of high return investments

Indicator 32 • Effects of inflation of cost of living

Indicator 33 • Risk diversification

11 years of consumer financial education in South Africa

Trend and Subgroup Differences on the Financial Quiz

• BASIC ARITHMETIC: 2010 only four-fifths answered the question correctly compared

with almost nine out of ten (86%) in 2012.

• UNDERSTANDING OF INFLATION: more people answered this question incorrectly in

2012 when compared with 2011.

• UNDERSTANDING OF INTEREST AND COMPOUND INTEREST: the share

answering this question correctly did not change significantly over the period.

– The share giving an incorrect answer on the interest rate question and compound

interest question was greater in 2012 than in 2011 and 2010.

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11 years of consumer financial education in South Africa

Financial Knowledge Domain Score(2010-2012)

Male Female16-19 years

20-29 years

30-39 years

40-49 years

50-59 years

60-69 years

70+ years

Black African

ColouredIndian

WhiteLow living standardMedium living standard

High living standard

No schooling

Primary

Some secondary

Matric or equivalent

Tertiary

Urban formal

Urban informal

Rural, trad. auth. areasRural farms

0

50

100

2012 2012 National Average (55)2011 2011 National Average (56)

11 years of consumer financial education in South Africa 21

Overall Scores, 2011-2012 and Composite measure

Financial Planning

Appropriate Product Choice

Financial Knowledge & Understanding

Overall Financial Literacy Score

Financial Control

2012

2011

2012

2011

2010

2012

2011

2012

2011

2012

2011

0 10 20 30 40 50 60 70

54

54

55

56

55.99115

46

45

50

53

61

58

11 years of consumer financial education in South Africa

Way forward

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• Repeat core financial literacy core module year-on-year• Next Baseline study – 2016

• Challenge: Integrating programme and project survey and M & E statistics into Baseline and Annual survey

11 years of consumer financial education in South Africa

THANK YOU FOR YOUR ATTENTION

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Mr Lyndwill ClarkeHOD: Consumer Education

Financial Services Board – South AfricaE-mail: Lyndwill.Clarke@fsb.co.za

Tel: (+27) 12 422 2819Mobile: (+27) 79 881 1805

www.fsb.co.za

www.mylifemymoney.co.za