Financial literacy is the education, knowledge and understanding of various financial skills to improve the standard of living and the quality of life. It involves the ability to understand how money works in the real world: how someone manages to earn or make it, how that person manages it, how and where he or she invests it, and how that person saves it or donates it to help others. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed, smart and effective decisions with regard to all of his or her financial resources.
Financial.org incorporates the ability, concepts, knowledge, understanding along with information and financial skill sets into a bundle known as Lifetime Financial Education to Improving People's Lives.
The Australian Government established a National Consumer and Financial Literacy Taskforce in 2004, which recommended the establishment of the Financial Literacy Foundation in 2005. In 2011 ASIC (Australian Securities & Investment Commission) released a National Financial Literacy Strategy (www.financialliteracy.gov.au) — informed by an earlier ASIC research report 'Financial Literacy and Behavioural Change' — to enhance the financial wellbeing of all Australians by improving financial literacy levels. The strategy has four pillars:
In Singapore, the National Institute of Education established the inaugural Financial Literacy Hub for Teachers in 2007 to empower school teachers to infuse financial literacy into core curriculum subjects to embed pedagogically sound activities to engage students in learning. The Singapore government through the Monetary Authority of Singapore funded the setting up of the Institute for Financial Literacy in July 2012. This Institute aims to build core financial capabilities across a broad spectrum of the Singapore population by providing free and unbiased financial education programmes to working adults and their families.
In Saudi Arabia, the Saudi Economic and Development Company, SEDCO in response to the massive need for a program that teaches people how to manage their money more effectively and to change their perception towards money being an infinite resource launched a program that addresses this need in 2012. Through this flagship program called Riyali, 50,000 citizens of Saudi Arabia from different walks of life including college students, high school students, and low-mid income group learn basic financial skills such as budgeting, saving, investment and other vital abilities required to make wise financial decisions in daily life.
The US Treasury established its Office of Financial Education in 2002; and the US Congress established the Financial Literacy and Education Commission under the Financial Literacy and Education Improvement Act in 2003. The Commission published its National Strategy on Financial Literacy in 2006. For all those efforts put in, recent surveys by Institute for Financial Literacy & Council for Economic Education found that 58% of American does not have enough financial skills and know-how to manage their finance & investment properly.
The United States of America is home to many millionaires and billionaires, but as recent surveys suggested, the average American falls behind when it comes to financial knowledge and literacy. As a nation, the U.S. has been the No.1 Current Account Deficit and it continues to widen year after year with overall debt exceeds 20 Trillion Dollars as of March 2018. This shows how much more American citizens, businesses and government are falling behind and borrowing from their foreign counterparts. As such, it is fair to say that Americans in general are undoubtedly in dire need of basic financial education, knowledge and mindset.
The United Nations have a long history of supporting financial education and promulgating the virtues of financial literacy. The Millennium Development Goals of the United Nations were developed as the foundation for a roadmap and strategy agreed upon by all nations and the world’s leading development institutions. The goals have stimulated extraordinary efforts to bring together governments, NGOs, corporations, foundations, academia and other important players to develop and proceed with a bold agenda on financial literacy.
Financial literacy proponents in the U.N. are moving ahead aggressively in an effort to help prevent financial setbacks for the hundreds of millions of individuals and families in many developed and 3rd world countries that are exposed to greater financial stress by virtue of their lack of financial knowledge and education.
Globalization all over the world in the past 20 years has created many benefits as well as setbacks. One of the biggest issues is wealth inequality which has widened year after year with no exceptions. Today, the world's richest 1% get to control over 80% of the wealth. These 1% are the so-called High-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs) who have been successfully manage their financial assets and investments year after year through Equity Capital Markets. Thus, they continue to be richer and more powerful while the rest of the world remains stagnant or goes backwards.
The same cannot be said about majority of the 2 billion middle-income class as well as over 3 billion poor people in the world today. Most have never gotten any real opportunity to gain exposure in the global capital markets. However, in recent years, awareness of the importance of financial education is gaining momentum among policy makers in many emerging and developing economies over the world.