In 2010, the World Economic Forum published a report entitled “Achieving Global Financial Literacy” which highlights the financial literacy competency gaps across the globe. The report provides an overview of financial literacy levels in 12 countries and offers recommendations for promoting global financial literacy.
One of the primary reasons that financial education is so important is that it empowers people to make good decisions with their money. Making good decisions with money affects all aspects of someone’s life and has a positive ripple effect on many other people’s lives as well.
The resources below provide information about the importance of financial literacy around the world. The articles discuss the impact of financial literacy on individuals, families, businesses, and governments.
Financial literacy is a critical skill that can empower individuals to take control of their financial well-being and make informed decisions. Through financial education individuals can gain the confidence they need to manage their personal finances, evaluate financial products and services, save and invest, avoid frauds and scams, establish a credit history and so much more.
The Global Financial Literacy Excellence Center (GFLEC) works in partnership with leading international organizations including the Organisation for Economic Co-operation and Development (OECD), World Bank, World Economic Forum (WEF), Milken Institute, and the Centre for Financial Inclusion at Accion to advance knowledge about the importance of financial literacy and best practices for effective financial education. Our goal is to help people around the world achieve greater economic security through improved access to quality financial education.
One of GFLEC’s primary objectives is to serve as a convening body for researchers working on topics related to financial literacy. Researchers from around the world have traveled to Washington D.C. for GFLEC’s Annual Research Symposium since 2008. The symposium brings together leading researchers from various fields including economics, sociology, psychology, finance, educational psychology, marketing and public policy to discuss new research findings related to global efforts in promoting financial literacy
The Global Financial Literacy Excellence Center (GFLEC) and the World Bank Group recently conducted a survey of financial knowledge in 140 countries. The findings were featured in a report, Financial Literacy Around the World: Insights to Inform Global Financial Literacy Policy, which was published by GFLEC and the OECD Center for Entrepreneurship, SMEs, Regions and Cities.
The authors analyzed survey data collected from more than 150,000 adults in 140 countries. They found that financial literacy is an issue across nations at all levels of economic development. In particular, the researchers noted that only 13% of respondents demonstrated basic financial knowledge. This finding is troubling because it suggests that many people do not possess sufficient financial literacy to make sound financial decisions.
The subject matter tested by the survey included basic numeracy and interest compounding questions to more complex concepts such as risk diversification and inflation. The authors concluded that “the top performing country has high levels of financial literacy only for the simplest concepts.” This result implies that there are no countries with populations of financially literate individuals who have consistently demonstrated competency across all types of financial concepts.
The findings also suggest that gender differences continue to exist in terms of financial capability. For example, though women have higher rates of basic financial
The global financial crisis that erupted in 2008 devastated economies and lives around the world. Governments, businesses, and households are still struggling to recover. The crisis was also a warning: we need to be better prepared for the next one, which might not be far off.
And yet, most people don’t know enough about the financial system to protect themselves from its pitfalls or take advantage of its opportunities. This is a big problem in rich countries—but it’s even worse in developing countries. The less developed a country’s economy, the more important financial literacy is—not just for individuals but for the whole economy.
Understanding such matters as how banks work, how compound interest can make saving pay off, and how to avoid paying fees for services you don’t need is crucial for anyone who wants to manage money well. But it is also crucial for economic growth overall. The more financially literate people are, the more likely they are to open bank accounts and borrow responsibly. In turn, that makes them better able to start new businesses—and more attractive employees for existing ones. And it means that when a crisis does come along, people are less likely to panic and sell their assets at a loss—which can make the crisis worse.
Financial literacy is a key life skill that forms the basis of individual financial well-being. Financial education helps individuals and families make informed choices about money, manage their finances effectively, save for the future, and avoid costly mistakes. It also prepares people to navigate the world of work and be financially self-sufficient.
Despite its importance, financial literacy remains a challenge globally, particularly among youth and women. Women are less likely to participate in the labour market, which is a key driver of economic growth; they tend to earn less than men; and they have less access to credit. Women who work often have lower incomes than their male counterparts because they are more likely to work part time or in lower-paying occupations; they are also more likely to take career breaks to raise children or care for family members.
Worldwide, only 18 per cent of men aged 15–24 reported having received financial education compared with 14 per cent of women in the same age group. Youth worldwide were also found to lack basic financial knowledge. For example, fewer than half knew how interest rates affect loan repayments and two thirds failed to answer correctly about risk diversification across different types of investments.
In the current economic climate, financial literacy education is important for all. But what if you have a child with special needs? What money management skills should she be learning? Many parents of children with special needs are concerned that their child will never be able to handle his or her own finances. While it is true that adults with developmental disabilities face many challenges in managing money, with proper planning and sound financial education, individuals with developmental disabilities can successfully learn how to manage their own money.
To start, parents should teach their children how to recognize different denominations of currency. Although this skill seems basic, it can pose a challenge for many people with developmental disabilities. The National Education for Assistance Dog Services (NEADS) provides a great program called the Money Mentor Program that teaches individuals with visual impairments how to identify bills and coins by touch. This program teaches individuals to identify each denomination by its size, thickness, and the presence or absence of ridges on the edge of the coin. These tactile identifiers differ for each denomination and make it possible for individuals without sight to distinguish between bills and coins.
Most people in the world are very poor. In fact, most of the people who have lived have lived in poverty.
To be poor is not to have enough money to meet one’s basic needs—food, clothing, shelter, and health care. For example, if a person doesn’t have enough food and clothing, he is likely to get sick more often than a person who can afford more adequate nutrition and clothing. If he cannot afford medical care, he will probably die sooner than someone who has access to it.
But there is more to poverty than lack of income and health concerns. Because they are poor, many people are unable to get an education or training that would help them earn a better living. They may not be able to find jobs because they lack the skills or experience that employers seek. Their children may not go to school because their parents cannot afford school fees or supplies. Too often, children are forced to work instead of going to school. Those who do not receive an education cannot get better jobs when they grow up; so the cycle of poverty continues from generation to generation.
Poverty also makes it harder for people to move out of slums or dangerous neighborhoods into safer ones where they might be able to find better jobs and services such as schools