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Financial Literacy: A Solution for Poverty |
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by Aldrin Aujero | 27-07-2018 19:49
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Financial literacy is defined as the ability to use knowledge and skills to manage financial resources effectively (World Bank). This skill, though often overlooked, is an integral factor to gaining of financial independence and stability that is often overlooked throughout society. The ability to manage wealth effectively means being able to optimize and and enact rational decisions that would lead to optimal social outcomes such as being able to capitalize on compound interests, choosing optimal loan plans, and avoiding debt. The Market Crisis such as that of the 2008 led many to realize the importance of understanding the growing number of financial instruments available to investors at a more and more complex scale. This knowledge gap exists both in the underdewoods d and especially in the developing countries such as the Philippines. In 2015 Standard and Poor's (S&P's) ranking services reported that only 25% of Filipinos are financially literate (S&P). The direct implications of thise lack of financial education such as the lack of exposure and of access to financial accounts is also exemplified by a 2016 study which reports that more than 20 million Filipinos saved money in 2016 but only half had bank accounts (World Bank Study). The same is true for the United States where it is reported that 57% of the population is financially illiterate. Most financial literacy classes appear in partnership with insurance companies hoping to gain more clients. The problem, however, is that these institutions are inherently biased towards their products, leading consumers to distrust them and avoid such lessons affiliated with products. |
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3 Comments
Hello Aldrin
The world that we are leaving in has a limited amount of resource. So it is most important that we allocate the right amount of resource in the right place. Which is optimization, and to do so financial literacy is essential! A more systematical education is very much in need so that more individuals could learn it!
Thanks for the report!
Posted 30-07-2018 22:28
Hello Aldrin, taking care of one's own wealth is to do with education and public standard of their society. Not urging the standard to individuals, but the level of public standard can affect individuals of leading them how to manage their property.
Financial illiteracy makes people waste their money, stealing their opportunity to become affluent and wealthy. It is also to do with environmental problem and residential area, as their dwellings can become easily polluted and they might not be able to defend themselves or escape from the area easily because their wealth cannot let them do so.
Sadly, poverty issue is in close relationship with climate change and relative environmental issues. That's why financial literacy needs to make people escape from their status.
Posted 30-07-2018 15:25
Hi Adrin!
Just like financial literacy, many other factors play a role into the illiteracy of many citizen. The direct lack of basic education is the core problem. Once that issue is taken away, then financial literacy can been factored in as a long term/ working class problem.
But still I do agree with you that once financial literacy is understood by the masses, many will produce healthy decisions, based on what they own financially, make proper investments and think cautiously about taking loans.
Good report Aldrin!
Posted 27-07-2018 21:04