Like charity, financial literacy must begin at home

Thursday, March 23rd, 2023 01:30 | By
Shilling drops further amid falling forex reserve
Kenyan currency. PHOTO/Courtesy.

Across Africa, several countries are increasingly turning their attention to the need to mobilise domestic resources for economic transformation, finance infrastructure development, achieve fiscal stability and reduce reliance on external financing.

However, the continent still suffers from chronic low savings rates compared to other continents, especially European countries. Although attributed to a combination of sociocultural, political and economic factors, low savings in most African countries are primarily attributed to financial illiteracy.

According to 2021 report by EFG Hermes, Kenya’s savings rate was at 13 per cent, which is way below Africa’s average of 17 per cent. 

By contrast, Uganda and Tanzania have crossed the 20 per cent mark even though their per capita income is significantly lower.

More than ever, financial education is a core life skill as more households are living from paycheck to paycheck.

Loosely defined as the ability to understand and apply different financial skills effectively, including personal financial management, budgeting and saving, financial literacy makes individuals self-sufficient.

Kenya’s poor saving culture is attributed to high spending power, especially by young people who follow international trends closely. The report further cites minimal

mentoring and financial illiteracy as a basis for the low savings culture.

Achieving financial well-being is more than how much you make or whether you know how to invest in the stock market. It is about being able to make money choices that prioritise your needs and acknowledge delayed gratification.

This level of financial planning skills is essential to making financial decisions related to spending and saving yet remains one of the most undervalued skills.

Like most African countries, Kenya has alarmingly low financial literacy levels. With a population of approximately 50 million people, only 38 per cent of Kenyans are financially literate, according to a 2021 Global Financial Literacy Survey.

Uganda recorded a 34 per cent literacy level, Tanzania 40 per cent, and 42 per cent in South Africa. From the study, it is clear that most people are unprepared to deal with rapid changes in the financial landscape.

Moreover, this is at a time when credit products such as mobile loans, credit cards and even log-book loans, many of which carry high-interest rates and complex terms, are becoming more readily available.

Given these risks, we must take individual responsibility to safeguard our financial situations, especially our children, from predatory financial practices and impart financial knowledge from a tender age.

Unfortunately, most parents need to do more to expose their children to money matters. While this stems from how most households raise their children, it’s time for a mind shift. We must involve them in day-to-day money matters, like managing household expenses, to open their minds to financial aspects.

Unlike the past decades, the current generation of children are growing up in an increasingly complex world. They not only have easy access to more resources but also multiple competing priorities. A solid foundation of financial education built around good money values can help them transition into financially responsible adults as they grow.

Kenya has yet to make strides in mainstreaming financial literacy in the curriculum. Our homes must, therefore, be the primary place of imparting financial literacy.

All we have to do is build a strong foundation by giving our children a perspective and building habits on money management.

Although there is plenty of information available online for children to learn about saving, planning, budgeting, and investment options, they still need proper guidance to develop financial acumen and understand how they should value money and use it efficiently.

Children learn and develop these traits through their experiences, role modelling and relationships. They are not born with the information, skills, or behaviours contributing to adult financial well-being.

What you learn during the maiden years is what you carry lifelong. Moreover, teaching children early about handling money provides them with a safe environment to make mistakes before they venture into the world, curbing the potential for a future full of financial blunders.

As we mark Global Money Week, we must make deliberate efforts to inculcate the basics of finance in our children before they go out into the world. These habits and skills will help them to make sound financial decisions throughout their lives in a sustainable manner.

—The writer is acting Managing Director, KCB Bank Kenya

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