Do you believe that financial education is only for the rich, the investors, the businessmen, the adults, the educated, the Overseas Filipino Workers (OFWs) and the accounting professionals?
And at your age, can you say that you are financially-literate?
According to the Organisation for Co-operation and Development (OECD), financial education is important not only to those who have the money like the investors and businessmen but also to the average family.
In fact, our parents are always making important financial decisions for the family. They continually pay the bills and they put you to the best schools. Parents make sure you have enough food and a shelter over your head. They also worry about hospital bills.
You and even I are making money decisions regularly so as to be able to balance what little budget we have for the day… for the week… for the month. And sad to say, many Filipinos are seemingly living from paycheck-to-paycheck. What more for those who are not expecting any regular income or compensation?
Financial Education should start at school
The OECD emphasized that financial literacy should start as early as possible and that it should start at school. You don’t need to wait until you are a grownup or become an employee to know about savings, investments, debt management, budgeting, credit, debit, education plans, retirement plans, insurance, entrepreneurship, passive income, stock market, asset, liability, credit card management, mutual funds among other things.
Even kids should already be undergoing financial education. It would be good if the Department of Education (DepEd) would review the elementary and high school curricula so that they could already incorporate such subjects as early as possible.
MindTreasures think that saving, investing, sharing and spending habits must develop from early ages.
Furthermore, the OECD also encourages the government of every country to do its share in educating its citizens and in promoting financial literacy. One of their tasks is firstly, to get the population interested in financial education.
Level of Financial Literacy
Surprisingly, in a study done by the OECD in 2006, it was revealed that the level of financial literacy is low in many countries, even the developed ones.
- 71% of adults surveyed in Japan did not know about equities and bonds
- High school students surveyed in the United States and Korea failed a test involving credit card management and retirement planning
- 67% of Australians surveyed claimed they understood the concept about compound interest but only 28% got the correct answer
- In another study, 63% of Americans are financially illiterate according to the data gathered by the Financial Industry Regulatory Authority
In PowerPinoys.com, it mentioned that the Philippines ranked 68th based on a worldwide financial literacy index.
Another finding from the OECD study is that there are highly educated people with high incomes who are not well-informed about financial matters just like their counterparts. Though this is the case, Keith Hall, assistant governor of the Reserve Bank of Australia said matter-of-factly, “I doubt it will surprise you to hear that the lowest levels of financial literacy – and, hence, the greatest need for financial education – are generally to be found among the most vulnerable members of our society.” So, even though Hall’s statement was based on a study done in Australia, it is safe to say that people in the vulnerable sector of society, like ours, are usually the ones needing financial education the most.
Come to think of it, in Dasmarinas, Cavite, it is said that a number of families have a member working abroad. Fitz Villafuerte noted in 2015 that around 32% of Filipino households have family members abroad and that 48.6% are investing while 31.4% put money as savings in banks. Now that the Middle East is experiencing a slowdown in their economy, the more our OFWs and their families should be proactive in learning more about financial matters since work stability is a bit questionable these days, what with some Middle Eastern companies closing down or reducing the workforce.
Why is financial education important?
Futurpreneur Canada defines financial literacy as “the ability to understand how money works and how it can work for you, even when you are sleeping. It is how someone makes, manages and invests it, and also expends it.”
Prue Allen of She Investments looks at financial literacy as “not just about understanding money, but it is also about making decisions for the future.” Her concern is about empowering individuals.
Why is financial education important then? There are numerous websites and blogs discussing the importance of financial education. And here are their reasons:
- Financial literacy will help you prepare for life. Harvard College thinks it should be a part of anyone’s life.
- Level of financial literacy significantly affects the quality of life.
- Financial literacy does the following:
– keeps you competitive
– helps you identify risk
– keeps your personal finances in order
– helps you communicate more effectively with managers and accounting departments
- Helps people become self-sufficient so as to achieve financial stability.
- Will help you make good financial decisions so you could avoid the debt trap, predatory lenders, fraud and high interest rates resulting to bancruptcy, foreclosure, bad credit
- It will help you make realistic goals and will help you know what options fit your lifestyle and budget
Tips to improve financial literacy
Shalena Gonzales, an American financial aid specialist, gives us some tips on how to improve our level of financial literacy:
- Educate oneself by reading financial books about setting financial goals and saving money
- Get guidance from a financial counselor to successfully manage your finances and reduce debt
- Take classes within your local community that offer information about finances
- Set up accounts through websites which provide resources and tools to assist you with making good financial decisions
Financial education is very important, not only to the rich sector of our society but also to all the others starting with the basic unit, the family. So no matter what age level, income level or educational level you are at, financial education is a must in order for you to be able to face the future confidently.