70% of Africans financially illiterate, says report

Johannesburg - Less than a third of sub-Saharan Africa's population is financially literate - compared to over half in OECD countries. The estimated average financial loss due to a lack of personal finance knowledge is $1,819.

To help boost financial literacy across the nation, forex broker experts at BrokerChooser analysed search volume data to uncover the financial terms people find most confusing - and demystified what the most-searched jargon actually means.

People with low financial literacy are typically worse off than those with high financial literacy, even when their income levels are similar, a study reports.

Below are the top 10 financial terms that baffle people the most, in their order of rank:

1. Equity is the most misunderstood financial term worldwide and in Africa

A new report from forex broker experts at BrokerChooser has revealed that 'Equity' is the most puzzling financial jargon, receiving a staggering 11,950 monthly searches in Africa and 247,100 average monthly searches globally.

Adam Nasli, Head Analyst from BrokerChooser, explained:

"While it's a fundamental financial concept, equity is often misunderstood due to its broad usage across different contexts. Equity is the amount an owner would retain if they sold an asset or business, after settling any debts tied to it. In simple terms, it's the value you truly own. For example, if you own a house worth $300,000 and you owe $200,000 on the mortgage, your equity in the home is $100,000. 

In the stock market, equity usually refers to shares in a company - giving investors partial ownership, potential voting rights, and a share in the profits. As with a home, a company's equity represents the difference between its assets and liabilities - what the owners would effectively be left with after selling all assets and settling all obligations."

2. GDP ranks second, with 11,600 monthly searches in Africa

Despite being frequently mentioned in the news, 'GDP (Gross Domestic Product)' ranks as the second most confusing financial term, drawing 11,600 average monthly searches in Africa, and 176,800 globally. GDP measures the total market value of all final goods and services produced in a territory - usually a country  - within a given time frame such as a quarter or a year. 

The total size of a country's GDP, however, doesn't tell us much on its own. But GDP per person often reflects how developed an economy is, and GDP growth - especially when looked at alongside other indicators - can be a useful sign of how healthy an economy is.

"Understanding this metric will help people make more informed choices about spending, saving, and investing. For example, strong GDP growth often signals a robust economy and healthy job market - boosting consumer confidence and encouraging big financial decisions like buying a home or investing in equities and other risk assets. 

Conversely, a shrinking GDP may point to an economic slowdown, prompting more conservative financial behaviour. In such environments, investors typically rebalance portfolios toward defensive positions, shifting allocations to safer assets like bonds to mitigate risks," says Adam Nasli, Head Analyst and forex broker expert at BrokerChoose

3 & 4 . Arrears and ETF (Exchange Traded Fund) continues to puzzle Africans

'Arrears' places third on the list with 4,950 monthly searches in Africa, while 'ETF (Exchange Traded Fund)' ranks fourth, racking up 3,000 monthly searches across the country and 142,230 globally. An ETF is a fund traded on a stock exchange. A fund can include many asset types, including equities, bonds, commodities or even forex. 

For example, a fund that tracks the S&P 500 Index holds the 500 stocks that constitute the index. The most popular ETFs are equity ETFs that track popular equity indexes like the S&P 500. ETFs are issued by asset management companies like Vanguard or BlackRock. One asset management company can issue many ETFs.

"Think of it as a ready-made investment portfolio that trades on the market. Many people are drawn to ETFs because of their low fees, tax efficiency, and flexibility. It also makes it easier for people to diversify their investments without needing to select individual securities. Whether you're looking to invest in a specific sector, track a major index like the S&P 500, or gain exposure to gold or tech stocks, there's likely an ETF for it," Nasli continues.

Adam Nasli, from BrokerChooser, emphasised the growing importance of financial literacy:

"Financial literacy is no longer just a nice-to-have skill - it's essential. With AI now in the hands of fraudsters, financial scams are becoming more sophisticated and harder to detect. People need to be better equipped not only to manage their money wisely but also to protect themselves from misleading offers and deceptive financial products.

Misunderstanding or overlooking commonly used terms like yield, ETF or equity can lead to costly mistakes - whether that's misjudging the risk and return of an investment, or simply missing out on opportunities to build long-term wealth. 

Ultimately, understanding these fundamentals can be the difference between financial strain and sustainable wealth growth. It's not about becoming an expert overnight, but rather building the foundation needed to make sound decisions, ask the right questions, and stay one step ahead."

The top 10 financial terms that baffle Africans the most: