The Increasing Importance of Financial Literacy Education: In the modern world, we have more choice than we have ever enjoyed before. Choice, overall, is a good thing. We can buy fresh produce from the other side of the world; order clothes from international brands with a click of the mouse;, and choose how we spend our free time from a bamboozling range of options.
Financial services have also grown with the times. There are now a huge number of credit providers all desperate to give us their money. But while the range of financial products has grown exponentially, the education we need to make an informed choice is sadly lacking.
The Increasing Importance of Financial Literacy Education
What does financial literacy mean?
Financial literacy is the ability to understand how money works in the modern world – how to earn it, how to manage it and how to save it. 20 years ago, financial literacy would have involved learning how to balance a checkbook and save for a rainy day, but since then, the financial services industry has changed beyond all recognition.
Now, most banking and financial transactions happen online and in real time. This means we need to develop an understanding of how to navigate personal finance technology at an early stage to be truly financially literate as young adults.
The importance of financial literacy education
In terms of public education, financial literacy is still largely unexplored territory. While educators acknowledge that it is essential students are financially literate enough to be career ready and equipped to make informed financial decisions, many are still unsure exactly how this can be achieved.
What specific skills should students be taught? What content should be included? How can the curriculum engage students in meaningful ways? Students need to understand how financial literacy applies both to their immediate and future worlds. The responsibility for raising levels of financial literacy lies not just with teachers and parents, but financial institutions and the government also have an important part to play.
Current levels of financial literacy
A recent study by payday loans website Wonga South Africa is one of the largest of its kind into levels of financial literacy. 18,000 customers responded to its financial wellness survey in May last year, which found that only 43 percent understood what a credit report was. Perhaps more worrying still was the fact that 77 percent said they didn’t look at the interest rates and fees on credit applications:
Studies of financial education, including this examination of financial literacy in America, show that financial illiteracy is widespread; however, it is particularly prevalent in specific demographic groups. In the U.S., levels of financial literacy were found to be at their lowest among those with low levels of education, women, African-Americans, and Hispanics.
Without the knowledge and understanding to make sensible saving and spending decisions, it becomes increasingly difficult to improve their situation.