Structural guideline interfacing financial literacy and savings behaviour of South African households: a study of Tshwane and Mahikeng municipality employees
The emergence of a credit economy in South Africa, gave birth to an environment where most households spend a great percentage of their earnings and even beyond, on immediate satisfactory goods and services. The literature reveals that most South Africans have several bank accounts, credit cards and debit cards, among others, thus making it difficult for them to understand their financial situation most of the time. As such, debts are incurred over a continuous period of time, giving room for little or no savings. As a result, a personal approach to cash management and the level of financial literacy among South Africans becomes a concern among academic scholars. Although, in theory, financial literacy was found as a core determinant of household savings behaviour, it is evident that though South Africans are familiar with financial knowledge and its terms compared to their peers in emerging economies, they have not inculcated this knowledge into making the right financial decisions with regard to savings and wealth creation. Consequently, the rate of personal savings in South Africa has been on a continuous decline, thus affecting the growth of the economy. As such, this study sought to ascertain financial literacy variables that have statistical significant impact on household savings behaviour. Thus, to achieve this objective, financial literacy micro-variables were used to obtain quantitative data from two municipalities (City of Tshwane and Mahikeng) in South Africa. The variables tested in this study were grouped into independent (financial literacy variables) and dependent variables (variables that measure household savings behaviour). These variables were statistically tested and analysed to ascertain the statistical significant impact of financial literacy on household savings behaviour. Correlation statistical analysis was performed to ascertain the relationship between dependent and independent variables as well as aiding pre-selection of variables for the Structural Equation Model. In addition, factor analysis was performed to identify micro-variables that have a statistical significant impact on household savings behaviour as well as a confirmatory factor analysis through structural equation modelling. The results revealed that most of the financial literacy micro-variables extracted from financial control, financial planning and financial knowledge as well as understanding, have positive statistical relationships with variables that measure household savings behaviour. Although it was also ascertained that the more South African households are knowledgeable and make use of financial and credit products, the lesser they are likely to save. Hence, the researcher succeeded in obtaining empirical results that statistically support the logic that financial literacy is a core determinant of household savings behaviour. As such, it is recommended that stakeholders in charge of financial literacy and savings campaigns in South Africa should employ the contribution of this study, which identifies savings literacy as the way forward to improve household savings behaviour.