By Iman Ben Chaibah (@ImanBenChaibah)
One of the trendy words nowadays is “Financial Literacy”. As a way of thinking, it has started long ago; but as an actual term, it only started picking up in the last decade. This happened when an international organization, “The Organization for Economic Co-operation and Development (OECD)”, initiated a project to start improving and standardizing financial literacy across the member countries. From there, it started spreading across the globe. So what is financial literacy? Why is it essential? How and when do you start it?
Financial literacy is to have the required background knowledge on different financial terminologies and calculations. Through these, you’d be able to make wise decisions on spending, investments, savings and so on. This sort of literacy includes fully understanding the meaning and long term value of terms like assets, stocks, mutual funds, retirement, cash flow, loans, credit cards, wealth, interest rates, inflation, and so on.
So why is financial literacy important? In a consumer & business world, financial literacy is becoming a required life skill. Lack of financial literacy leads to money mismanagement, one of the major causes leading to depression. Money issues are also one of the major factors that lead to divorce around the world. Financial literacy is essential for anyone who is considering starting a business; the lack of it either doesn’t allow you to start up or leads to bankruptcy. And finally, aside of many other obligations for financial literacy, this sort of literacy leads to financial growth in the community, this eventually reflects on the country’s economy.
So how is financial literacy acquired and when do you start it? We are obviously not born with knowledge in financial literacy; it is something we have to acquire consciously or unconsciously by time. You either acquire it from your family, education, peers, or self education & experiences.
Not all families have the abilities to instill financial literacy in their children. Financial education among children is more prominent between families with business background and those who have their own investments. In those families, instilling the value of money, wise spending, the awareness of different investment approaches, the practicality of business start-ups and many more starts at very young ages. It’s a conscious effort undertaken by the family, and due to the early starts of this process, these values get implanted in children’s minds firmly.
Education in this region is not yet mature in this sort of literacy, except when it comes to students who are specializing in the finance and accounting fields. Else, sadly, it’s not part of the mandatory primary education. This, being a growing required life skill, should start being integrated with schools’ curriculums as certain countries are already starting to do so and not as a separate subject but rather with the main subjects. Financial literacy is suggested to integrate its vocabulary with the language subjects, calculation methods through math subjects, and technological application uses through the technology subjects, and so on.
As for family, acquiring financial literacy from peers happens only when the peers do have that sort of financial literacy through businesses, start-ups, or even family environment. Hence the known saying, “pick your friends wisely”, because you do influence and get influenced by both of your knowledge background. So, you either prosper together or you lead each other to weak financial decisions.
Finally, self-education is done as self-education in any field of life. By meeting people who are experts in the matter, reading books and magazines that talk about financial literacy, from listening to interviews and seminars by financial and business experts, by experiencing first hand financial exercises, and so on.
It is never too early to start financial education. The earlier those values are implanted, the earlier you can avoid the financial risks and ill decisions that may drain your financials all through your future. So invest your time to learn about the topic, invest in your children with educating them in this matter. Sometimes a passing financial tip you get can literally saves you a fortune. So always share the knowledge and the cycle will always find its way back to you.
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