The Challenges and the Social Benefits of Financial Literacy
The Challenge
Worldwide, just 1-in-3 adults show an understanding of basic financial concepts. Although financial literacy is higher among the wealthy, well educated, and those who use financial services, it is clear that billions of people are unprepared to deal with rapid changes in the financial landscape. Credit products, many of which carry high interest rates and complex terms, are becoming more readily available.
Governments are pushing to increase financial inclusion by boosting access to bank accounts and other financial services but, unless people have the necessary financial skills, these opportunities can easily lead to high debt, mortgage defaults, or insolvency. This is especially true for women, the poor, and the less educated—all of whom suffer from low financial literacy and are frequently the target of government programs to expand financial inclusion.
Social Benefits of Financial Literacy
- Financial stability soothes marital stress and decreases divorce rates.
- Financial education helps a society because it helps people meet their basic needs.
- Financial education reduces crime.
- Financially literate people are better equipped to help others.
- More personal financial stability can lead to fewer wars and financial planning can even lead to world peace.
Source: The Societal Benefits of Financial Literacy. FAMag.com. David G. Strege.