Abstract
<p>Prior research shows that personal savings are one of the most important financial sources for start-ups of entrepreneurial firms. The lack of personal savings and seeming shortage of financial knowledge could contribute to the low incidence of new venture creation, and the high failure rate amongst South African entrepreneurs. This paper investigates the perceptions of 286 Business Management students with a minimum of three years’ working and management experience, regarding both their financial literacy and their need and desire for financial education. The outcomes of the study show the necessity for financial education and financial literacy in South Africa. The respondents showed a lack of confidence in their money management skills and expressed a desire for more financial knowledge. It is possible that an increased level of financial literacy could lead to more entrepreneurial activity and a decrease in new venture failures.</p><p> </p><p><strong>Key words and phrases:</strong> personal financial literacy, personal debt, personal savings, personal financial management, new venture creation</p>
Highlights
In view of the fact that personal savings represent the principal source of funding used by entrepreneurs to start and grow their entrepreneurial ventures, the extremely low level of savings, combined with the excessive debt levels of individuals in South Africa, is a cause for concern
The percentage of the respondents who were dissatisfied with the four elements regarding their personal finances was determined by calculating the overall percentage of the respondents that displayed dissatisfaction towards statements in the questionnaire, positioning their answers to the specific attitude as the two most negative figures
It can be assumed that individuals who perceive that they have adequate financial knowledge feel that they have control over their personal finances; these individuals seem to be confident in managing their money and making investment decisions
Summary
In view of the fact that personal savings represent the principal source of funding used by entrepreneurs to start and grow their entrepreneurial ventures, the extremely low level of savings, combined with the excessive debt levels of individuals in South Africa, is a cause for concern. Anthes (2004:49) concludes that financial literacy is the ability to read, analyse, manage and communicate about personal financial conditions that affect material well-being .... The ability to discern financial choices, discuss money and financial issues without (or despite) discomfort, plan for the future, and respond competently to life events that affect everyday financial decisions, including events in the general economy. According to the US Financial Literacy and Education Commission (Basu, 2005:2), financial literacy is defined as the ability to make informed judgements and to take effective actions regarding the current and future use and management of money. Financial literacy should include the ability to understand financial choices, plan for the future, spend wisely and manage and be ready for life events such as job loss or saving for retirement
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