Education linked to financial health – survey

2012-04-19 11:25

Households with higher education levels are financially much better off, according to a survey released today.

“What is clear is that the level of financial wellness improves drastically when the household possesses a higher level of education,” according to a statement on the Momentum Household Net Wealth Report.

The report divides households into four categories.

“Anchored unwell” households are deeply rooted in an unwell financial position with very little likelihood of getting out without major outside help. Five percent of South African households fall into this category.

Households in the “drifting unwell” category find their finances are unstable and negative circumstances could easily shift them into the “anchored unwell” position. However, they could also shift into a better category with positive influences.

About 49% of households are found in this category in the survey.

“Currently the majority of South African households are in the ‘drifting unwell’ category, making them most vulnerable to adverse economic developments such as interest rate increases, inflation pressures and any loss of income,” the report said.

The “drifting well” category is also unstable and could shift up or down a category quite easily. According to the survey, about 30% of households fall into this section.

Sixteen percent of respondents fall into the “anchored well” category where they are financially healthy. These households have at least one member with tertiary education who is employed. They have a financially knowledgeable person aged 50 to 59.

The survey found households with some primary and some secondary education are mainly found in the drifting unwell section.

Those who had completed secondary and tertiary education are found in drifting well.

“This gives a solid indication that education has a substantial impact on a household’s financial wellness.”

The survey also looked at how employment affects wealth. Unsurprisingly, it found that employed households have the highest financial wellness score.

However, it found that unemployed and not-economically-active households’ financial wellness scores are not significantly lower than those of employed households.

“This indicates that although South African households are income poor, they may be asset rich,” according to the report.

It could also indicate that the government’s various support programmes for vulnerable households, such as social welfare grants, are helping.

The survey also assessed how age affects financial stability.

“The analysis suggests a pattern showing an improvement in the financial wellness of households until close to retirement. This may be due to not making sufficient provision for retirement during pre-retirement years.”

The index was compiled for Momentum by Unisa’s Bureau of Market Research and Personal Finance Research Unit.

Instead of determining financial wellness using only a household’s income statement – comprising income, expenditure and savings – this survey included assets, liabilities and net worth, level of education, living environment and locus of control.

A nationwide survey was conducted among 2 937 South African households in the second half of last year.

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