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South Africans big on budgeting, small on saving

While South Africans are good at keeping household budgets, they save little

Johannesburg, SOUTH AFRICA – 25 July 2012 – More than 70% of survey respondents in South Africa, Brazil, India and Russia cannot endure a personal economic emergency spanning more than three months. In fact, South Africans only have enough savings put away to provide a buffer for 1,4 months.

Among the BRICS countries (Brazil, Russia, India, China and South Africa), China is the major exception, where just about half of respondents reported that they have enough savings to help them survive a personal financial calamity lasting six months or longer. With July being Savings Month in South Africa, these results underline that continuous effort is required to convey the importance of saving to South Africans.

The alarming findings on South Africa's low savings were part of a collaborative research programme undertaken by Visa and Kiplinger's Personal Finance Magazine. The project assessed and ranked the financial literacy levels of people in 28 nations as part of the 2012 Global Financial Literacy Barometer.

The survey was conducted between February and April 2012, among 25 500 participants. Brazil topped the list as having the most financially literate people, followed by Mexico and Australia. South Africa ranked 25th out of 28 countries.

When asked if they had a household budget, South Africans1 ranked fourth out of the 28 countries, with a score of 50, on par with Australia and following Japan and Brazil. However, South Africans reported low savings, ranking 20th out of the 28 countries in responding to the question: "How many months' worth of savings do you have set aside for an emergency?" (1,4 months).

It also emerged that, compared with other countries, South African parents seem reluctant to talk to their children about money management. In this category, South Africa scored 26th out of the 28 countries, with South African parents only spending 8,6 weeks a year talking to their children about money management issues such as budgeting and saving. Brazilian parents appear to be far more focused on educating their children about finances; they spent 38,1 weeks of the year teaching their children about money. Mexican parents do not leave much to chance and spend 41,2 weeks a year talking to their children about money management.

In Brazil, the top scoring country overall, more than half of the people surveyed also believe government and school-supported financial education should begin before children reach the age of nine.

Of concern is the apparent perception gap among South African survey respondents. While they do not talk much to their children about money, they believe that teenagers and young adults understand money management basics and are prepared to manage their own money. (For the latter, South Africa ranked fifth out of the 28 countries.)

Kate Kelly, Corporate Relations Manager for Visa Sub-Saharan Africa said: "The Global Financial Literacy Barometer clearly demonstrates that, while there have been great strides made in advancing financial education, there is still much more to be done. Visa is committed to helping people of all ages gain the financial tools necessary to become better money managers."

Other key findings of the global survey include:

  • 68% of survey respondents have fewer than three months' worth of emergency reserves on hand to fund basic needs in the event of an unexpected financial event like job loss.
  • 25% of respondents who reported they don't have enough funds to cover a personal economic emergency fall into high income categories.
  • Respondents in more than half of the 28 countries surveyed believe that overall, teenagers and young adults do not understand money management basics, such as budgeting, savings, debt and spending responsibly.
  • In wealthier countries, many parents don't speak as regularly with their children about the financial future.
  • Across the globe, the youngest and oldest citizens face the most personal economic risk in the sense that they have the smallest emergency reserves and they are least likely to follow a budget.

A more detailed summary of the key findings of the Global Financial Literacy Barometer is attached.

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About Visa Inc.
Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable digital currency. Underpinning digital currency is one of the world's most advanced processing networks–VisaNet–that is capable of handling more than 20,000 transaction messages a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank, and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: Pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit www.corporate.visa.com.

Visa Contact:
Dumezulu Maphophe
Fleishman-Hilliard
+27 82 333 4659
Dumezulu.maphophe@fleishman.co.za

*Visa conducted the 2012 Global Financial Literacy Barometer survey between February and April 2012 with 25 500 participants in 28 markets. In South Africa, 773 participants between the ages of 18 and 64 were surveyed.

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