Johannesburg - Young South Africans; particularly those belonging to Generation Z (aged 25 years and under) face a gauntlet of challenges on their path to financial freedom. For many, the rungs of the socioeconomic ladder are beyond reach, impeded by circumstances such as youth unemployment and a decade of economic underperformance. Any conversation with Gen Zs around healthy financial habits must therefore be based on empathy and a keen understanding of the unique pressures that young South Africans face.

These were the starting sentiments of financial expert and award-winning author, Sam Beckbessinger in conversation with journalist, Alishia Seckham as part of a webinar focusing on personal financial management for Gen Zs. The webinar, which forms part of a series entitled Think Big, is sponsored by PSG and is open and freely available to the South African public.

The author of the bestselling title, Manage Your Money Like a F&*%#ing Grownup, Beckbessinger draws on her extensive experience within South Africa’s financial services environment: “the key to promoting sound financial acumen amongst the youth lies in making the fundamental shift from talking about money in terms of products, to talking about it in terms of principles.”

Generally speaking, South African youth are coming to an understanding of these principles too late in their financial journey, if at all, when in fact they are highly capable of being introduced to these principles from as young as 3 years old. Beckbessinger however argues that there are universal principles that apply, regardless of how much money is being managed.

Four core principles form the foundation of how money works. These include the concept of an asset (how money is made), the concept of compound interest (how money grows), the importance of diversification (how to keep money safe) and debt, which is the “shadow side of compound interest,” as she asserts.

Taking a pragmatic approach to her exploration of these matters, Beckbessinger provides the following four tips for Gen Zs on how to work towards financial wellness:

Understand the value of time

Touching on the “power of compound interest,” Beckbessinger explains that the saying, “time is money,” is more literal than many may realise. She illustrates this point by way of an anecdote: a vampire invests R200, and without adding any additional investment to that initial amount, he earns R1 billion over 200 years.

Here, the most valuable takeout is that time is the most important contributing factor to wealth accumulation, rather than the size of the investment. The same can be said about debt, where the longer the indebted person takes to pay off the debt, the more expensive it becomes.

Move beyond month-to-month thinking

This focus on the importance of time provides a segue into Beckbessinger’s advice for young people to steer clear of living from “pay cheque to pay cheque”. Touching on research conducted by Tyme Bank; which indicated that the majority of South Africans have ‘more month left at the end of their money’, she urges Gen Zs to develop “bigger picture thinking.”

This will materialise differently for different people, particularly within the South African context where the financial status of young people can fall anywhere along a very wide spectrum from privilege to severe financial shortfall. Individuals at the latter end of the scale may need to factor in culturally applicable realities such as black tax and caretaking responsibilities for extended family. There is therefore no one-size-fits-all solution.

For this reason, Beckbessinger advocates a practical approach to financial management that gets “back to basics,’ and starts with simple steps like tracking your expenses. This can be done conveniently using an app or manually, but ultimately, keeping a close eye on how and why money is leaving your bank account will provide you with an idea of whether your financial habits are supporting your personal goals.

Know the warning signs of financial scammers

Touching on the usefulness of technology and the proliferation of financial advice on social media, Beckbessinger cautions Gen Zs against falling for “get rich quick schemes”. One of the telltale signs of a money scam is undue and relentless urgency to make a deposit or financial commitment. “If you’re being pressurised to make a rash decision, you’re most likely being scammed.”

Arguably the best-performing asset class is the stock market, which historically has earned investors 7% above inflation. Individuals should be wary of any person offering higher returns than these or claiming to be able to offer guaranteed returns.

Lastly, before entering into an agreement involving an investment, check the websites of local financial services boards – regulated companies and products are generally safer.

Seek good advice

Given the mushrooming of financial scams, good financial advice has never been more valuable. Trustworthy financial advisers will be upfront about their fee structure and will have transparent and official policies and contracts in place. They will also be open to answering any questions to ensure that their clients make informed decisions based on solid financial principles.

Managing money is not complex, but it is hard. What this means is that it is relatively easy for young people to learn the principles of financial management without worrying about complicated jargon. The most difficult part is managing your feelings about finances – using a financial plan to achieve peace of mind, resisting the emotional highs of impulsive splurges and ultimately, defining what financial security means to you,” says Beckbessinger.