Financial literacy is defined as the possession of knowledge and skills by individuals to manage financial resources effectively so as to enhance their economic well-being. It also enables financial service providers to better understand their products, the associated risks and the needs of their customers. It includes trust, confidence and participation in the formal financial system.
Financial literacy occupies a center-stage in the quest to achieve financial inclusion, financial stability, economic growth and development. Inclusive growth in the economy can only be achieved where a larger proportion of the population participates in the financial markets. For this to happen, it is essential for the populace to know, understand and develop the ability to evaluate financial products and services as well as participate in the financial markets.
Financial literacy is also an essential requirement for consumer protection in the financial sector as it creates better awareness and understanding of policies, financial products, prices and practices.
Financial literacy is a very important aspect of education and every individual should be empowered by the basic money concept, every individual has to know ways of spending money. You need to know more than just how to buy and sell to customers, you should be in a position to distinguish between revenue and profits, you need to understand personal finances as well as understanding money concepts so that you will be able to make sound financial decisions and avoid financial mistakes. This handout will give full details on why it is important to be financially literate and the basic concepts of money management.
The Importance of Financial literacy to Individuals
- It enables you to understand basic money management.
- Financial literacy helps you to become self-sufficient so that you can achieve financial stability.
- It enables you to understand the impact of economic choices on the world you live in.
- Financial literacy enables one to seek and receive financial services and products.
- It helps people to understand government financial policies
- It helps a person to develop a financial road map to identify what he earns, what he spends and what he owes.
- Research shows that financial education can lead to financial knowledge and positive changes in attitudes, motivation and planned behavior.
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