Money is an important component of modern society. It allows us to purchase food and property, lets us travel, enables companies to expand, and helps communities, societies, countries and regions develop.
Unfortunately, more than 30% or 3.5 billion adults worldwide lack an understanding of basic finances; a situation that has resulted in, among others, high personal debt, bankruptcy, stagnant growth and billions continuing to live in poverty.
Defining Financial Literacy
At its most basic, financial literacy involves grasping the importance of using money wisely for the things we want and need. This involves learning about important financial concepts and how to use various skills and tools to manage, budget and invest finances.
Essentially, it is difficult for people to make informed financial decisions if they do not know how to gain money, spend it well and save.
Hence, the goal of financial literacy is to help people build wealth wisely and teach them how to navigate and respond to the related challenges and opportunities that arise.
It is also the motivation behind programmes like FinGreen — an initiative by leading e-commerce-based direct selling company QNET — that strive to take a ground-up approach to the problem.
Empowering Individuals to Attain Their Ambitions
Many of us dream of financial sustainability. This explains in part why the gig economy is thriving, with hundreds of millions of people reported to be supplementing existing incomes via part-time and on-demand work. It is also why a large number of individuals have decided to go into business for themselves.
Where financial literacy factors here is in empowering individuals to, among others, recognise monetary risks related to their choices and take appropriate steps to achieve their goals.
For instance, studies confirm that low financial literacy has caused millennials — the largest segment of the global working world — to incur high and growing debts. This not only makes them unprepared for financial shocks and crises but also translates to an inability to pay for things like groceries, fulfil loan commitments and save for retirement.
Worryingly, too, a large number risk bankruptcy.
Financial education, via programmes like FinGreen, zeros in on the problem of money management and allows all individuals, including and especially those disadvantaged by the current financial system, to learn about budgeting and expense management as well as retirement planning.
Fostering Stronger and More Stable Families
Individuals with strong financial know-how also contribute to the stability and well-being of families.
In a nutshell, families are adversely affected by troubled adults who struggle to meet their financial commitments. So, when adult individuals learn to be savvier with their finances, the entire family benefits and there is less worry and concern. They also instil good money management skills and values that can be emulated by everyone.
Incidentally, experts believe that it is never too soon to begin one’s financial literacy journey, and say that even children between three and five years of age can be taught about saving and spending.
Transforming and Developing Communities
Apart from families, financial education is also essential for communities to develop and prosper.
According to the World Bank, 76% of adults worldwide have bank accounts. This marks a significant increase from 2011, when the tally stood at a mere 51% of the global population.
Even so, gaps persist, and the situation is particularly concerning in regions like Asia and Sub-Saharan Africa as well as among young people and women, who have been traditionally excluded from access to formal financial services.
Granted, governments, policymakers and financial institutions have been working to improve the situation. Yet, it is not only about increasing access to account ownership but also about empowering communities to achieve greater economic independence and break the cycle of poverty.
Financial literacy, thus, can serve as a lifeline for societies by enabling individuals to become more adept at managing their finances and, consequently, creating a positive ripple effect.
Making a Difference
The bottom line is that financial literacy is an indispensable skill that goes beyond money management and can serve as a catalyst for real change.
This is why FinGreen focusses on making a difference with a unique approach that operates based on three pillars — Assess, Train and Advocate — and delivers holistic education that can ensure a brighter tomorrow for everyone.
