ENG2612
EXAM PORTFOLIO 2024
UNIQUE NO.
DUE DATE: OCTOBER/NOVEMBER 2024
, The Impact of Financial Illiteracy on Debt in South Africa
Introduction
The issue of debt in South Africa has reached alarming levels, with consumers
collectively owing over R2.5 trillion. This situation affects millions of people and has
severe implications for families and communities. In the editorial "Financial illiteracy
breeds debt," it is emphasized that a key factor contributing to this debt crisis is financial
illiteracy. Many South Africans lack a fundamental understanding of financial matters,
which leads them into debt traps and exacerbates their struggles. This essay will
explore the relationship between financial illiteracy and debt, the role of predatory
lending practices, and the need for increased financial education.
Body
One of the most concerning aspects of the debt crisis in South Africa is the low rate of
financial literacy among its citizens. According to research, the financial literacy rate
dropped from 51% in 2015 to only 42% in 2021. This decline means that nearly half of
the population lacks the necessary skills to manage their finances effectively. Without a
solid understanding of budgeting, saving, and borrowing, individuals are more likely to
make poor financial choices. They may take on debt without fully comprehending the
consequences, leading to a cycle of borrowing that can be difficult to escape.
The editorial also highlights the dangers posed by informal lenders, such as loan
sharks, who exploit the financially illiterate. These predatory lenders often advertise
tempting offers to those in desperate need of money, targeting individuals who may
already be in precarious financial situations. The lack of financial knowledge can make it
difficult for these individuals to recognize the risks involved in borrowing from such
sources. As a result, they may turn to these lenders for quick cash, only to find
themselves trapped in a cycle of high-interest debt that spirals out of control.
EXAM PORTFOLIO 2024
UNIQUE NO.
DUE DATE: OCTOBER/NOVEMBER 2024
, The Impact of Financial Illiteracy on Debt in South Africa
Introduction
The issue of debt in South Africa has reached alarming levels, with consumers
collectively owing over R2.5 trillion. This situation affects millions of people and has
severe implications for families and communities. In the editorial "Financial illiteracy
breeds debt," it is emphasized that a key factor contributing to this debt crisis is financial
illiteracy. Many South Africans lack a fundamental understanding of financial matters,
which leads them into debt traps and exacerbates their struggles. This essay will
explore the relationship between financial illiteracy and debt, the role of predatory
lending practices, and the need for increased financial education.
Body
One of the most concerning aspects of the debt crisis in South Africa is the low rate of
financial literacy among its citizens. According to research, the financial literacy rate
dropped from 51% in 2015 to only 42% in 2021. This decline means that nearly half of
the population lacks the necessary skills to manage their finances effectively. Without a
solid understanding of budgeting, saving, and borrowing, individuals are more likely to
make poor financial choices. They may take on debt without fully comprehending the
consequences, leading to a cycle of borrowing that can be difficult to escape.
The editorial also highlights the dangers posed by informal lenders, such as loan
sharks, who exploit the financially illiterate. These predatory lenders often advertise
tempting offers to those in desperate need of money, targeting individuals who may
already be in precarious financial situations. The lack of financial knowledge can make it
difficult for these individuals to recognize the risks involved in borrowing from such
sources. As a result, they may turn to these lenders for quick cash, only to find
themselves trapped in a cycle of high-interest debt that spirals out of control.
