Updated: 4 days ago
Author: Barbora Belova
Date of Publication: 22/05/2023
Financial literacy is the knowledge and skills needed to manage your money effectively. In fact, it's an essential life skill that everyone should learn, regardless of age, gender, or background. Unfortunately, not all countries prioritize financial literacy education in their schools. Therefore, it is leading to a lack of understanding about personal finance among students.
Financial literacy consists of understanding financial concepts, terms, and strategies needed to manage money effectively. It includes knowledge of personal finance topics such as budgeting, saving, investing, credit and debt management, insurance, or retirement. It also includes thinking in stressful situations, solution-making, and determination of the final verdict.
Overall, financial literacy is about having the confidence and competence to manage your money in a responsible and effective way. Yet it refers both to the short-term and long-term run. Thus, it's a crucial life skill that can impact your financial well-being and quality of life.
Financial literacy of students across the world
According to the OECD INFE 2020 International Survey of Adult Financial Literacy, financial literacy rates among adults vary significantly across countries. The survey covered 26,000 individuals from 25 countries and found that:
● The highest financial literacy rates were found in Canada, Finland, and the The Netherlands. In particular, over 60% of respondents demonstrated high levels of financial literacy
● The lowest financial literacy rates were found in Brazil, Poland, and Russia. Specifically, less than 30% of respondents demonstrated high levels of financial literacy
● On average, only 33% of respondents demonstrated high levels of financial literacy. Indicating that many adults lack the skills and knowledge needed to make informed financial decisions.
Results of survey
The survey also found that financial literacy rates vary by age, income, and education level. Younger adults and those with higher incomes and education levels tend to have higher financial literacy rates.
The results of this survey highlight the need for more comprehensive financial education programs. In fact, it’s a top need for adults in countries with lower financial literacy rates. It is necessary to provide adults with the knowledge and skills to make informed financial decisions. It can help improve adults’ financial well-being and create a more financially literate society.
Financial literacy education doesn't have to be complicated. It can be taught in simple, easy-to-understand terms, using real-life examples. Students can learn about how to create a budget, understand credit scores, and the importance of saving for retirement. They can also learn about the risks and benefits of different types of investments, like stocks, bonds, mutual funds, or cryptocurrency.
Parents can also play a significant role in teaching their children about financial literacy. They can encourage their children to save a portion of their allowance or earnings and explain the importance of having an emergency fund. Parents can also show their children how to compare shops and look for deals when making purchases.
In conclusion, financial literacy is a critical skill that all students should learn. In fact, it's not only essential for their financial well-being but also for their overall success in life. Therefore, we can help to improve financial literacy education in schools and homes. This way, future generations can make better financial decisions and build a more prosperous future.
How to improve financial literacy
Improving financial literacy is essential for making informed financial decisions and achieving financial goals. Here are some ways to improve financial literacy:
● Educate Yourself
Start by educating yourself on financial concepts and terms. For example, you can read books, articles, and blogs on personal finance topics, take online courses, or attend seminars and workshops. Make sure to use reliable sources of information.
● Use Budgeting Tools
Creating and sticking to a budget is one of the fundamental aspects of financial literacy. Use budgeting tools such as mobile apps or spreadsheet templates to track your income and expenses and set financial goals.
● Start Saving and Investing
Saving and investing are crucial to achieving long-term financial goals. Learn about different types of investment vehicles, such as stocks, bonds, mutual funds and cryptocurrency. Also, you can choose the ones that are consistent with your risk tolerance and goals.
● Avoid Debt
Understanding credit and debt management is an essential part of financial literacy. Avoid taking on excessive debt, pay your bills on time, and aim to pay off high-interest debt first.
● Seek Professional Advice
If you need more help, consider seeking advice from a financial professional. They can help you and also, they can assemble a financial plan that fits you. They can also provide investment advice, and answer any questions you have about personal finance.
● Start Early
Start educating yourself and practicing good financial habits as early as possible. When you start earlier, you can have more opportunities and space to build your wealth and reach your financial plan and aims.
All in all, by following these steps to improve your financial literacy, you can make better financial decisions. Besides that, you can avoid financial pitfalls, and build a secure financial future for yourself and your family.
● OECD. (2020). OECD/INFE 2020 International Survey of Adult Financial Literacy. Available from: www.oecd.org/financial/education/launchoftheoecdinfeglobalfinancialliteracysurveyreport.htm
● Jason Fernando. (2023). What Is Financial Literacy? Available from: https://www.investopedia.com/terms/f/financial-literacy.asp
● Harvard College. (2023). Guides Financial Literacy. Available from: https://college.harvard.edu/guides/financial-literacy
● Ron Carson. (2021). 6 Ways To Boost Financial Literacy And Empower Your Financial Future. Available from: https://www.forbes.com/sites/rcarson/2021/04/27/6-ways-to- boost-financial-literacy-and-empower-your-financial-future/?sh=32f210284e14