10 myths about financial planning in South Africa debunked

Financial planning myths, we have all heard them. With financial literacy not being a priority in most school curricula and many people growing up without guidance from parents on how to manage money, it’s no wonder that so many South Africans find themselves learning the hard way once they start earning an income. Unfortunately, those ‘hard money lessons’ often lead to long-term consequences such as unsustainable debt and delayed financial freedom.

Here are ten common myths about financial planning and the truth behind them.

Financial planning is only for the wealthy

Myth: Only high-net-worth individuals need a financial plan.

Reality: Everyone, regardless of income, can benefit from a financial plan.

Wealth isn't defined by how much you earn but rather by your money habits. Many self-made wealthy individuals credit their success to cultivating healthy financial behaviours early on. The TV show “I Blew It” offers sobering examples of lottery winners who lost it all, proving that without a solid plan and good money habits, even millions can vanish. Financial planning is for anyone looking to set goals, manage debt, and build a better future.

You only need financial advice close to retirement

Myth: Planning starts at 55.

Reality: Starting early allows for greater growth and less stress later in life.

Financial planning has no age limit. The earlier you begin, the better you can benefit from compound interest and long-term investment growth. Younger investors can typically take on more risk, while older investors may shift to more conservative strategies as retirement nears. Regardless of age, the fundamentals remain the same: set goals, manage a budget, and invest wisely.

Financial planning is a once-off exercise

Myth: You draft a plan once and you're done.

Reality: Your plan should evolve with your life.

Life changes, marriage, children, job changes, divorce, or illness, and so should your financial plan. Meeting with your adviser annually (or during major life events) ensures your goals, strategies, and policies stay aligned with your personal circumstances.

Financial advisers just sell products

Myth: Advisers only want to sell insurance or investments.

Reality: Reputable advisers provide holistic guidance across all financial aspects.

A professional financial adviser should act as your partner in building financial wellness. Beyond products, they help with budgeting, debt management, retirement and estate planning, tax efficiency, and achieving personal goals.

Financial advice is too expensive

Myth: I can't afford a financial adviser.

Reality: Many advisers offer flexible and transparent fee models.

Financial advice isn’t just for the wealthy. Most advisers offer scalable solutions tailored to your needs. Understanding the costs upfront is key, and in many cases, the long-term value gained from a sound financial strategy outweighs the fees. It's worth checking whether fees are negotiable or based on sliding scales depending on your assets.

My employer's retirement fund will be enough

Myth: My pension or provident fund will fully cover my retirement.

Reality: Most South Africans don’t save enough and need to supplement their employer benefits.

While employer-sponsored funds are a good starting point, they often fall short of covering your full retirement needs. It’s important to review your contribution rate and project whether it aligns with your retirement goals. Tax-efficient vehicles like retirement annuities (RA) and tax-free savings accounts (TFSA) can help fill the gap.

If you change jobs, you should preserve your savings either by transferring them to your new employer’s fund, a preservation fund, or an RA, all of which allow continued investment without tax penalties.

All debt is bad

Myth: Debt should be avoided at all costs.

Reality: Not all debt is bad, some can be leveraged to build wealth.

Debt has a bad reputation, but not all debt is created equal. Home loans, student loans, or a personal loan to fund a business can be considered ‘good debt’ when managed wisely. Even credit cards can be beneficial if used correctly and paid off in full each month. Many banks offer reward programmes like cash back, travel points, or discounts that can benefit you, but should not be the reason for spending.

You only need life cover when you're old

Myth: Life insurance is for the elderly.

Reality: The younger and healthier you are, the cheaper your premiums.

Risk cover, including life and disability insurance, protects your loved ones and assets. If you have a young family, it's vital to plan for their education and well-being in case you're no longer around. Getting cover early locks in lower premiums and ensures that your health status doesn't affect eligibility down the line.

It’s also important to note that funeral cover is different from life insurance. Know the difference and make sure your family is properly protected.

Financial planning is just about investing

Myth: It’s all about beating the markets.

Reality: Financial planning is far broader, it includes estate planning, tax efficiency, and setting life goals.

A good financial plan considers legislation, tax implications, personal goals, and risk management, not only investment returns. Your adviser should help you stay up to date with changes in regulations and ensure your plan still serves your evolving needs. Trying to time the markets is risky; instead, your investment strategy should match your risk appetite and long-term objectives.

I can do it all myself online

Myth: Google and apps are enough.

Reality: Online tools are helpful, but they can't replace personal advice.

While online calculators and investment apps are great resources, they don’t replace human expertise, especially when it comes to navigating South Africa’s complex tax laws, retirement strategies, and local market trends. DIY planning also exposes you to potential scams or misunderstandings of terms and conditions. Working with a qualified adviser provides clarity, accountability, and peace of mind.

There’s no shame in having believed some of these myths; they’re common and widespread. But armed with accurate information and the right financial adviser by your side, you can make better choices that put you on the path to financial security and freedom. It’s never too early (or too late) to start taking control of your financial future.

* Nxumalo is a financial adviser at Alexforbes.

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