The importance of financial planning for South African youth
More young South Africans are prioritising wellness through therapy and fitness, but they continue to overlook financial well-being, and it is costing them more than they realise.
Money stress spills into every part of life, from relationships to mental health, yet many young people build their early careers without building a financial plan
According to a Sanlam report, 57% of South Africans cite financial stress as the top factor affecting their mental health, with 18–24-year-olds the most vulnerable. Yet, despite South Africa's high youth unemployment rate, there are 20.9 million working young people aged 15 to 34 who still face financial challenges due to limited financial literacy. The 1Life Youth Generational Wealth Survey found that while 80% believe they can build wealth once employed, only 30% have a monthly budget, and half don't know how to secure their financial future.
The opportunity to build strong financial habits early is invaluable. Even modest savings in your 20s can have a powerful impact by your 50s. Good habits compound over time. Like a muscle, the earlier you start these habits, the stronger they become.
Many young people assume that financial planning means cutting back on their current lifestyle, says Brachner. Good advice isn't about restrictive spending, and we often encourage our clients to travel and celebrate life's experiences, as this is important in your 20s. Rather, a good financial plan gives you the freedom to do more of what matters now, while still setting yourself up for the future.
There's a common misconception that financial advice is only for the wealthy. Traditional advisor models typically focus on assets to invest, which excludes most young people who typically only have a salary to invest. But they still need guidance - not to manage wealth, but to build it. Just like they invest in therapy or fitness, they can invest in financial well-being.
A 2024 AfroCentric study revealed that while 94% save for retirement, only 8% have consulted a financial advisor. Formal, tailored advice remains underutilised in South Africa. Too often, young people turn to well-meaning relatives or friends for advice. But a Certified Financial Planner (CFP®) is like a family GP, someone who understands your life, has no agenda, and helps you build a plan that works for you,' says Brachner.
Five tips for young South Africans who want to take control of their financial future:
1. Create a plan and don't go the DIY 'finfluencer' route.
There's no shortage of financial advice online, and increasingly, a flood of 'finfluencer' content on social media. Some of it is useful, a lot of it is not, and without proper training, it's hard to tell the difference. You wouldn't diagnose a serious illness by Googling symptoms. The same logic applies to your finances. A qualified professional can cut through the noise and guide you based on your unique goals and circumstances.
2. Choose a Certified Financial Planner (CFP®):
Just like you'd want a qualified doctor for your health, you need a certified financial planner (CFP®) for your finances. CFPs are held to global standards, pass rigorous board exams, maintain ethical codes, and are required to act in their best interest. It's the peace of mind you won't get from TikTok.
3. Seek out advice that isn't product-driven:
Good financial advice should start with you: your life, your goals, your values. Insurance or investment products may support your plan, but they shouldn't be the plan. If the advice is just a way to sell a product, it's not real financial planning.
4. Know how financial advice is priced, and pick a model that works for you:
Financial advice isn't free, but how you pay matters. Too often, fees are hidden behind phrases like 'it's included,' which can sound appealing, especially to younger investors, but might not deliver value. Here's a breakdown:
· Commission-based: This is common with life insurance and some investment products. Advisors earn upfront commission when they sell a product, but often provide little follow-up advisory service.
· Assets under management (AUM) advisors: Advisors charge a percentage of your investments. This model can work if you've already built up wealth, but if you're starting in your financial journey, some advisors may still take you on, but only by selling you commission-based products. This may mean you are deprioritised compared to wealthier clients.
· Flat-fee advisors: You pay for advice based on your needs, not your assets. This model provides access to objective, personalised advice, which is beneficial for young professionals who are earning, saving, and investing for the first time. This advice is offered as a once-off or monthly fee, based on your level of financial complexity.
5. Remember, financial freedom isn't about restriction.
The goal of a solid financial plan isn't to stop you from living now so you can enjoy life later (in retirement). It's about aligning your spending with your goals. When you have clarity and a plan, it often unlocks more freedom to say yes to what matters to you, whether that's travel, upskilling, or pursuing a side hustle.
* Brachner is a founder of Doshguide.
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