5 Financial challenges facing SA’s youth

South Africa’s youth face a range of challenges, from rising unemployment and living expenses to environmental crises, political turmoil, and the persistence of racialised inequality.

“Millennials and Generation Z youngsters come from a background steeped in poverty,” says Antoinette Prophy, founder and MD of The 88 Business Collective. “Being unable to rely on family and friends, and being dependent on the state, often has them limping out of the starting gate.”

We investigate how these challenges affect SA youths’ financial planning, and offer tips on managing money in a difficult economic climate.

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5 challenges facing the South African youth – and how to overcome them

1. Unemployment 

This is a major hurdle. Almost 43% of young people aged 25 to 34 are unemployed, along with 60% of those aged 15 to 24. Unemployment can partly be tackled through entrepreneurship – but for this, you need funds and workable ideas.

Farzana Botha, segment manager for Sanlam Savings, says that it makes sense to start small and locally. Find out the needs that exist in your community, and endeavour to meet them.

“Baking, babysitting or selling products can all bring in some income, and are easy to advertise on Facebook Marketplace or Gumtree,” she says.

You can also use your time to become financially literate. If you’re a student, Botha recommends investigating financial education opportunities offered on campus, or approaching non-profit organisations running skills development and entrepreneurship programmes.

2. Struggling to save

Youngsters who have grown up in poverty are unlikely to have seen their parents saving, so they may struggle to think of themselves as savers. However, Botha says, it may help to set financial goals as a concrete target to work towards.

“I grew up in a small town and had a lot of financial constraints, so saving even R5 a month was an achievement,” she says. “I created a stokvel with friends at school and we saved towards extra-curricular activities we couldn’t afford.

“Learning how to earn from limited resources, and save money for goals that empower you, is a life skill everyone should cultivate. Start small by saving up for a pair of sneakers, and you’ll soon see savings as a means to an end. Learn how to be your own hero!”

3. The status trap

Certified financial planner Louis van der Merwe says, “When we don’t have a clear idea of our values, or what brings us joy in life, we default to what advertisers tell us brings us happiness.” 

Instead of chasing the latest branded gadget, young people should become trendsetters, capable of standing out for their achievements and creativity.

“Individualism is prized in our culture, so find a way to express yourself that doesn’t rely on peer pressure, such as creating your own fashion style,” Botha says. “Popularity is fickle, so work on what you’d like to define you once you reach adulthood.”

4. Poor credit profile 

A good credit rating is important if you want to buy an asset like a car or house.

“As you build up your credit history, see it as a portfolio of evidence of your payment behaviour,” says Botha. “Your credit history shows you can be trusted with bigger amounts of debt in the future.”

This, however, is accompanied by a cautionary message. “Taking out credit is not a licence to buy something to boost your status.”

Botha recommends keeping your ideal future in mind when you start building your credit profile. “Credit is a good way to work towards your goals – say, saving for a holiday or buying your first car.”

5. Spiralling debt

Spending without due care can whittle away your income, and this, with easy access to credit, can cause you to fall into a spiral of borrowing to cover living expenses.  

Van der Merwe recommends that South Africans – youth included – only use debt to purchase income-generating assets, such as a mobile coffee stand to start a small business, or a small property that could generate rental income.

“If you do find yourself in debt, have a plan to settle it before taking out further credit,” he says. “Pay off your smallest loan balance first, even if it doesn’t carry the highest interest, as this will boost your confidence.”

Hope for the future

Botha says the world of work is changing, and new skills can propel young people into careers that weren’t even dreamt about a decade ago. “There are opportunities for young people that simply didn’t exist before,” she says.

Van der Merwe agrees. “We are a resilient nation, and Covid-19 has levelled the playing field for people who want to work remotely. Provided you have internet access, you don’t necessarily have to work close to where you live,” he says.

“There’s a larger window of opportunity – and the entrepreneurial spirit is strong in South Africans. If you can find a pain point you can solve, you’re almost guaranteed to be able to generate an income.”

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