adminSanderson Abel
Financial literacy is the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.
Improving financial literacy is a long-term behavioural change initiative. It requires a multi-faceted approach and sustained action over time to bring about gradual improvement.
Financial literacy is important, no matter what age group you belong to, whether you are just starting 5th grade, funding your college education, planning for a family or retiring. Financial Literacy will help you achieve your goals whether they are to own a business, raise a family, or to retire to a desert island.
Making thoughtful and informed decisions about your finances is more important than ever.
In today’s fast-paced consumer society, financial literacy is an essential everyday life skill. It means being able to understand and negotiate the financial landscape, manage money and financial risks effectively and avoid financial pitfalls.
Several trends are converging that demonstrate the importance of financial literacy. The burden of making sound financial decisions is coming to rest on the shoulders of consumers.
The financial environment seems like it is changing faster. Bull or bear markets, rising interest rates, falling interest rates, and the increased number of finance-related articles with conflicting views in the press can make creating and following a financial path difficult.
There are more financial options. Hundreds of credit card options and the ever-growing number of investment options further complicate financial decision making and this is further complicated with availability of more choices of financial services companies.
Banks, credit unions, insurance firms, credit card companies, building societies, financial planners, and others are all trying to get your business. If not careful you can easily be duped.
In a depressed economy like ours, many people today are feeling a high level of financial anxiety and are looking for answers.
Unfortunately, there are no guarantees or easy answers. However, there are several things you can consider to help relieve your financial anxiety.
1. Be as informed as you can be about your finances. After all, you are the one who is going to have to live with your decisions.
2. Try to find a financial institution or financial advisor that is knowledgeable, that you can trust, and with whom you can work comfortably. They cannot make all your decisions, but they should be able to help you put your situation into perspective and help you evaluate your options.
3. Try to develop good financial habits. Just paying attention to how you spend your money will probably lead to some ideas about how to save more. Over time, your savings can make a large difference in your future financial lifestyle.
4. Do the easy things. Starting to save early for a college education, enrolling for direct deposit of your paycheck, and using some form of automatic saving plan will help you accumulate funds. In addition, you will know you are taking positive actions.
5. Try to develop a financial plan of some sort. It does not have to be complicated or extensive. In fact, you may want to tackle one part of your finances at a time, such as looking at all your insurance needs. Breaking up a financial plan into smaller, workable pieces can make it easier to create.
6. Research credible sources. Your personal relationship banker or financial advisor could be the great places to start.
Improving financial literacy can benefit anyone, regardless of age, income or background. It helps people make informed choices, day-to-day and throughout their lives.
Financial literacy is a key contributor to improving financial wellbeing. However, it must be supported by other complementary factors.
Depending on circumstances, these factors may include financial inclusion, access to suitable financial products, and appropriate consumer protection and financial services regulation to ensure fair and efficient financial markets.
Improving the financial literacy has a beneficial flow-on effect to the broader economy, increasing levels of enterprising financial behaviour and greater participation in financial services and markets by confident and informed consumers and investors.
Financially literate consumers and investors are more likely to make effective financial decisions and less likely to choose unsuitable products and services.
Strengthening the ‘demand’ side of the market contributes to a sustainable business for financial service providers and helps reduce the incidence of poor consumer outcomes.
A base of financially literate consumers and investors, in combination with efficient financial markets, also potentially reduces the degree of regulatory intervention required.
If individuals do become financially educated, they will be more likely to save and to challenge financial service providers to develop products that truly respond to their needs, and that should have positive effects on both investment levels and economic growth.Individuals will be able to choose the right savings or investments for themselves, and avoid being at risk of fraud, if they are financially literate.
Sanderson Abel is an Economist. He writes in his capacity as Senior Economist for the Bankers Association of Zimbabwe. He can be contacted on [email protected] or on 04-744686, 0772463008.
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