Financial literacy: a conceptualisation in a South African University

Financial literacy is increasingly becoming an important and relevant topic in the modern-day world. Due to the complex developments in the financial services industry such as internet banking, mobile banking and online trading, which are also becoming more accessible to consumers, financial literacy is proving to be a necessary skill to have in order to make effective financial decisions. However, in a global and local context, the financial literacy levels of individuals are generally poor. South Africa ranks poorly among other countries in terms of financial literacy levels. A study performed by the Organisation of Economic Cooperation and Development showed that South Africa finished last out of 30 countries tested in their global financial literacy survey. Financial literacy levels vary among different groups in South Africa. For example, age, gender and financial education all affect the financial literacy levels of South Africans. In South Africa, individuals aged between 18-29 display higher levels of financial literacy than individuals aged 60 and above while financial education influences the level of financial literacy for an individual because it assists an individual in making correct financial decisions. Crucially though, financial literacy among South African university students is poor. Literature reveals that South African University students struggle with personal financial management more specifically saving, spending and managing debt. Therefore, based on this, the purpose of this study is to conceptualise financial literacy within Nelson Mandela University and to gain a comprehensive understanding of the factors that affect financial literacy among the students. To achieve the purpose of this study, an in-depth literature review was conducted on the definition of financial literacy, the nature and importance of financial literacy, the dimensions of financial literacy and financial literacy in a local context. Following this was an empirical investigation into the financial literacy levels of university students through the development of a questionnaire that tested the individual’s financial knowledge, financial attitudes, financial behaviours, financial skills and financial well-being. Moreover, the relationships between the financial literacy levels of individuals and the components were tested as well. For the purposes of this study a quantitative research approach was adopted. The reason for this was it was suited to the purpose of the study which was to test the financial literacy levels of university students. This required collecting and analysing large amount of data. The sample for this study were Nelson Mandela University students who were registered for the 2020 academic year. The target sample amount was 500 students. The sampling method used was convenience sampling it was implemented through an electronic questionnaire. The number of usable questionnaires collected was 484 which resulted in an effective response rate of 96.80%. These responses were captured onto an excel spreadsheet which were then analysed through Statistica. To analyse the empirical data collected, an exploratory factor analysis, content validity, inter-observer reliability, Chronbach Alpha and ANOVA analysis were all used. The empirical analysis revealed that amongst the relationships tested, there were generally weak to no relationships between the financial literacy levels of the university students and the components of financial knowledge, financial attitudes, financial skills, financial behaviours and financial well-being. The results of the study led to a set of recommendations being developed for different stakeholders of financial literacy. These are namely, the stakeholders being the individuals, scholars, academics and the government should focus on explaining the importance of financial literacy to university students and how they can use financial literacy to improve their financial well-being. Furthermore, financial literacy programmes need to be developed to assist in improving the financial literacy levels of South African University students. There also needs to be more representative financial literacy studies performed in order to obtain a more comprehensive understanding of the financial literacy levels of South African University students.Thesis (MCom) -- Faculty of Business and Economic Sciences, 202