Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. Raising interest in personal finance is now a focus of state-run programs in countries including Australia, Canada, Japan, the United States and the United Kingdom.
The Organization for Economic Co-operation and Development (OECD) started an inter-governmental project in 2003 with the objective of providing ways to improve financial education and literacy standards through the development of common financial literacy principles. In March 2008, the OECD launched the International Gateway for Financial Education, which aims to serve as a clearinghouse for financial education programs, information and research worldwide. In the UK, the alternative term "financial capability" is used by the state and its agencies: the Financial Services Authority (FSA) in the UK started a national strategy on financial capability in 2003. The US Government also established its Financial Literacy and Education Commission in 2003.
- In Australia, 67 per cent of respondents indicated that they understood the concept of compound interest, yet when they were asked to solve a problem using the concept only 28 per cent had a good level of understanding.
- A British survey found that consumers do not actively seek out financial information. The information they do receive is acquired by chance, for example, by picking up a pamphlet at a bank or having a chance talk with a bank employee.
- A Canadian survey found that respondents considered choosing the right investments to be more stressful than going to the dentist.
- A survey of Korean high-school students showed that they had failing scores – that is, they answered fewer than 60 percent of the questions correctly – on tests designed to measure their ability to choose and manage a credit card, their knowledge about saving and investing for retirement, and their awareness of risk and the importance of insuring against it.
- A survey in the US found that four out of ten American workers are not saving for retirement.
"Yet it is encouraging that the few financial education programmes which have been evaluated have been found to be reasonably effective. Research in the US shows that workers increase their participation in 401(k) plans (a type of retirement plan, with special tax advantages, which allows employees to save and invest for their own retirement) when employers offer financial education programmes, whether in the form of brochures or seminars."
According to 2014 Asian Development Bank survey, more Mongolians have expanded their financial options, and for instance now compare the interest rates of loans and savings services through the successful launch of the TV drama with focus on the fiscal literacy of poor and non-poor vulnerable households. Given that 80% of Mongolians cited TV as their main source of information, TV serial dramas were identified as the most effective vehicle for messages on financial literacy.
Additionally, a growing number of financial literacy researchers are raising questions about the political character of financial literacy education, arguing that it justifies the shifting of greater financial risk (e.g. tuition fees, pensions, health care costs, etc.) to individuals from corporations and governments. Many of these researchers argue for a financial literacy education that is more critically oriented and broader in focus; an education that supports individuals better understand systemic injustice and exclusion rather than one which understands financial failure as an individual problem and the character of financial risk as apolitical. Many of these researchers work within social justice, critical pedagogy, feminist and critical race theory paradigms.
Asia Pacific Middle East AfricaEdit
A survey of women consumers across Asia Pacific Middle East Africa (APMEA) comprises basic money management, financial planning and investment. The top ten of APMEA Women MasterCard's Financial Literacy Index are Thailand 73.9, New Zealand 71.3, Australia 70.2, Vietnam 70.1, Singapore 69.4, Taiwan 68.7, Philippines 68.2, Hong Kong 68.0, Indonesia 66.5 and Malaysia 66.0.
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 2008, the functions of the Foundation were transferred to the Australian Securities and Investments Commission (ASIC). The Australian Government also runs a range of programs (such as Money Management) to improve the financial literacy of its Indigenous population, particularly those living in remote communities.
In 2011 ASIC 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:
- Trusted and independent information, tools and support
- Additional solutions to drive improved financial wellbeing and behavioural change
- Partnerships with the sectors involved with financial literacy, measuring its impact and promoting best practice
ASIC's MoneySmart website was one of the key initiatives in the government's strategy. It replaced the FIDO and Understanding Money websites.
ASIC also has a MoneySmart Teaching website for teachers and educators. It provides professional learning and other resources to help educators integrate consumer and financial literacy into teaching and learning programs.
A number of Australian universities offer financial literacy subjects, such as Monash University (BEX2001: You, Money & Life), Macquarie University (AFAS300: Principles of Financial Literacy), The University of Western Australia (FINA1109: Managing Your Personal Finance) and The University of Melbourne (FNCE30008: Street Finance).
A nationwide survey was conducted by SEDCO Holding in Saudi Arabia in 2012 to understand the level of financial literacy in the youth. The survey involved a thousand young Saudi nationals, and the results showed that only 11 percent kept track of their spending, although 75 percent thought they understood the basics of money management. An in-depth analysis of SEDCO's survey revealed that 45 percent of youngsters did not save any money at all, while only 20 percent saved 10 percent of their monthly income. In terms of spending habits, the study indicated that items such as mobile phones and travel accounted for nearly 80 percent of purchases. Regarding financing their lifestyle, 46 percent of youth relied on their parents to fund big ticket items. 90 percent of the respondents stated that they were interested in increasing their financial knowledge.
In Singapore, the National Institute of Education Singapore 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. Such day-today relevant and authentic illustrations enhance the experiential learning to build financial capability in youth. Integral to evidence-based practices in schools, research on financial literacy is spearheaded by the Hub, which has published numerous impact studies on the effectiveness of financial literacy programs and on the perceptions and attitudes of teachers and students. A longitudinal study on the impact of financial literacy education on attitudinal and behavioural change is on-going. The baseline study on financial literacy in Singapore Schools 2008/9 (Koh, 2011) involved more than 6000 students and a thousand school teachers. It is the vision of the Hub to empower educators to equip their students to be financially savvy so as to make informed decisions and exercise discipline in managing their personal finance. The Hub is committed to spearheading high quality education programmes with research embedded for continual improvement so as to provide evidence-based practices.
The Singapore government through the Monetary Authority of Singapore funded the setting up of the Institute for Financial Literacy in July 2012. The Institute is managed jointly by MoneySENSE (a national financial education programme) and the Singapore Polytechnic. 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. From July 2012 to May 2017, the Institute reached out to more than 110,000 people in Singapore via workshops and talks. Some of the topics covered in these workshops and talks include:
- Making sense of your money
- Stretching your dollar
- Financial planning begins now
- Measuring your financial fitness
- Implementing your financial plan
- Basics of money management
- Understanding loans and credit
- Understanding life insurance
- Types of life insurance
- Understanding basic health insurance
- Types of health insurance
- CPF insurance schemes
- Building your nest egg
- Assessing your retirement income needs
- Options to build your retirement income
- Managing CPF money for your retirement
- Enrich your golden years
- Introduction to estate planning
- Steps in estate planning
- Introduction to personal investing
- Considerations when investing
- Major financial products
- Understanding bonds
- Fundamentals of share investing
- Singapore savings bonds
- Understanding real estate investment trusts (REITS)
- Understanding exchange traded funds financial habits and behaviours
- Is the deal too good to be true?
- Beware of scams
- When the deal turns sour
- Starting a family
- Buying your first HDB home
- Baby and child support schemes
- Buying a home within your means
- Money management for youth
- Give your child money sense
- Financial planning for families with special needs
- Financial planning for employees in transition
- Workshop for social workers
The FSMA is tasked with contributing to better financial literacy of savers and investors that will enable individual savers, insured persons, shareholders and investors to be in a better position in their relationships with their financial institutions. As a result, they will be less likely to purchase products that are not suited to their profile.
A study measured financial literacy among 1500 households in German-speaking Switzerland. Testing the three concepts compound interest, inflation, and risk diversification, results show that the level of financial literacy in Switzerland is high compared to results for other European countries or the US population. Results of the study further show that higher financial literacy is correlated with financial market participation and mortgage borrowing.
The Swiss National Bank aims at improving financial literacy through its initiative iconomix that targets upper secondary school students. The new public school curriculum will cover financial literacy in public schools.
The United KingdomEdit
The UK has a dedicated body to promote financial capability – the Money Advice Service.
The Financial Services Act 2010 included a provision for the FSA to establish the Consumer Financial Education Body, known as CFEB. From April 26, 2010, CFEB continued the work of the FSA's Financial Capability Division independently of the FSA, and on April 4, 2011, was rebranded as the Money Advice Service.
The strategy previously involved the FSA spending about £10 million a year across a seven-point plan. The priority areas were:
- New parents
- Schools (a programme being delivered by pfeg)
- Young Adults
- Consumer communications
- Online tools
- Money advice
A baseline survey conducted 5,300 interviews across the UK in 2005. The report identified four themes:
- Many people are failing to plan ahead
- Many people are taking on financial risks without realising it
- Problems of debt are severe for a small proportion of the population, and many more people may be affected in an economic downturn
- The under-40s are, on average, less financially capable than their elders
"In short, unless steps are taken to improve levels of financial capability, we are storing up trouble for the future."
There are also numerous charities in the United Kingdom working to improve financial literacy such as MyBnk, Credit Action, The Talking Economics Project, Citizens Advice Bureau and the Personal Finance Education Group.
Financial literacy within the UK Armed Forces is provided through the MoneyForce programme, run by the Royal British Legion in association with the Ministry of Defence and the Money Advice Service.
In 2006, Canadian securities regulators commissioned two national investor surveys to gauge people's knowledge and experience with investments and fraud. The results from both studies demonstrated there is a need better to educate and inform investors about capital markets and investment fraud. Education in this area is particularly important as investors take on more risk and responsibility of managing their retirement savings, and a large baby boomer population enters the retirement years across North America.
In 2005, the British Columbia Securities Commission (BCSC) funded the Eron Mortgage Study. It was the first systematic study of a single investment fraud, focusing on more than 2,200 Eron Mortgage investors. Among other things, the report identified that investors approaching retirement without adequate resources and affluent middle-aged men were vulnerable to investment fraud. The report suggests investor education will become even more important as the baby boomer generation enters retirement.
In the U.S., a national nonprofit organization, the Jump$tart Coalition for Personal Financial Literacy, is a collection of corporate, academic, non-profit and government organizations that work for financial education since 1995.
The United States Department of the 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.
While many organizations have supported the financial literacy movement, they may differ on their definitions of financial literacy. In a report by the President's Advisory Council on Financial Literacy, the authors called for a consistent definition of financial literacy by which financial literacy education programs can be judged. They defined financial literacy as "the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being."
The Council for Economic Education (CEE) conducted a 2009 Survey of the States and found that 44 states currently have K-12 personal finance education or guidelines in place. However, "only 17 states require high school students to take a course in personal finance."
The Center For Financial Literacy at Champlain College conducts a biannual survey of statewide high school financial literacy requirements across the nation. The 2017 survey found that Utah had the highest state requirement in the nation, while in Alaska, Delaware, DC, Hawaii, Rhode Island and South Dakota, students are entirely dependent on the initiative of their local school board.
In July 2010, the United States Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which created the Consumer Financial Protection Bureau (CFPB). The CFPB has been tasked, among other mandates, with promoting financial education through its Consumer Engagement & Education group.
The current approach to informing adults is typically from a deficit perspective with the educator seen as the expert providing the knowledge to the passive student; however, the recommended approach would incorporate a transformative learning framework as per the National Endowment for Financial Education's (NEFE) Quarter Century Project. The transformative learning model is the most established within adult education; within this framework, adults embark through a psychocultural process of acquiring new and/or revised interpretations of financial beliefs and attitudes that inform and shape new perspectives and behaviors. In addition, according to Xiao et al., it is suggested that financial education be provided to adults so as to correlate with their readiness to change as in Prochaska et al.'s Transtheoretical Model of Behavioral Change. Financial social work is a transformative learning model that was developed by Reeta Wolfsohn, CMSW at the Center for Financial Social Work. While it originated in 1997 from Wolfsohn's work with women as femonomics, it expanded in 2005 to all individuals, regardless of gender. Financial Social Work is a multi-disciplinary psychosocial approach that helps individuals examine and re-evaluate their money thoughts, attitudes and beliefs, and as it increases self-awareness and self-esteem, it empowers individuals' to establish long-term healthy money habits leading to greater financial security.
Financial Literacy to include personal financial planning concepts and tools should be taught to youths early on in High School. This financial education should include concepts like the 50/30/20 Budgeting Rule, and the Rule of 72. The 50/30/20 rule recommends spending 50% of one's income on life necessities like housing and food, 30% on entertainment like travel and dining, and 20% to be saved for short and long term needs. The rule of 72 calculates the amount of time it takes for an investment to double once by dividing 72 over the interest earned. A third concept is the Time Value of Money (TVM) which calculates a future value of an initial or annual investment. 
- "Get Smarter About Money Home – GetSmarterAboutMoney.ca". getsmarteraboutmoney.ca. Archived from the original on 2010-09-25.
- "Taking ownership of the Future: The National Strategy for Financial Literacy", US Financial Literacy and Education Commission, 2006
- "Financial Literacy Education in Ontario Schools".
- "International Gateway for Financial Education > Home". financial-education.org.
- "Financial Literacy – The CQ Researcher Blog". cqresearcherblog.blogspot.com.
- "Hecklinger, Richard E. Deputy Secretary-General of the OECD speaking January 9, 2006 at The Smith Institute, London". New Statesman. June 5, 2006. Archived from the original on July 20, 2006.
- Shawn Cole & Gauri Kartini Shastry, If You Are So Smart, Why Aren't You Rich? The Effects of Education, Financial Literacy and Cognitive Ability on Financial Market Participation (November 2008)
- "Evidence and Ideology in Assessing the Effectiveness of Financial Literacy Education". ssrn.com. SSRN .
- Enkhbold, Enerelt (2016). TV drama promotes financial education in Mongolia. ADB Blog
- Arthur, C. J (2012). Financial Literacy Education: Neoliberalism, the Consumer and the Citizen. ISBN 9789460919169.
- "Social Justice and the Gender Politics of Financial Literacy Education | Pinto | Journal of the Canadian Association for Curriculum Studies". Pi.library.yorku.ca. Retrieved 2013-10-18.
- Lucey, Thomas A; Laney, James D (January 2012). Reframing Financial Literacy: Exploring the Value of Social Currency. ISBN 978-1-61735-719-0.
- "Empowerment of Whom and for What? Financial Literacy Education and the New Regulation of Consumer Financial Services by Toni Williams :: SSRN". Papers.ssrn.com. 2007-03-16. doi:10.1111/j.1467-9930.2007.00254.x. SSRN .
- "Consumers or Critical Citizens? Financial Literacy Education and Freedom | Arthur | Critical Education". Ojs.library.ubc.ca. Retrieved 2013-10-18.
- "When politics trump evidence: financial literacy education narratives following the global financial crisis". Journal of Education Policy. 28 (1): 95–120. doi:10.1080/02680939.2012.690163.
- "Indian women surpass Chinese in financial literacy". The Times Of India. March 1, 2011. Archived from the original on July 21, 2012.
- "About the National Financial Literacy Strategy". Archived from the original on 2011-03-14.
- "Teaching". moneysmart.gov.au.
- "Know Risk". Know Risk. ANZIIF.
- Saudi Gazette (2012-09-06). "SEDCO launches Riyali financial literacy program". Saudi Gazette. Archived from the original on 2013-10-19. Retrieved 2013-10-18.
- http://finlit.nie.edu.sg Archived 2013-07-19 at the Wayback Machine.
- [dead link]
- "The MoneySENSE Singapore Polytechnic Institute For Financial Literacy". finlit.sg.
- Reading Room. "MoneySENSE". moneysense.gov.sg.
- "Home – Singapore Polytechnic". sp.edu.sg.
- About the FSMA, retrieved 17-8-16
- "Financial Literacy and Retirement Planning in Switzerland"
- "Iconomix wegpage", Swiss National Bank
- "Financial capability in the UK: Delivering Change", Financial Services Authority, 2006, page 1 ISBN 1-84518-418-1
- "MoneyForce". RBL. 12 March 2013. Retrieved 20 March 2013.
- 2006 CSA Investor Index
- "Page Not Found" (PDF). bcsc.bc.ca. Archived from the original (PDF) on 2010-10-25.
- Eron Mortgage Study, Neil Boyd, Professor and Associate Director, School of Criminology Simon Fraser University, March 31, 2005 
-  Archived June 2, 2010, at the Wayback Machine.
- "National Endowment for Financial Education". NEFE. Archived from the original on 2013-10-19. Retrieved 2013-10-18.
- "Is Your State Making the Grade: 2017 National Report Card on State Efforts to Improve Financial Literacy in High Schools". Center For Financial Literacy. Champlain College. 12 December 2017. Retrieved 17 December 2017.
- "About us > Consumer Financial Protection Bureau". Consumerfinance.gov. 2013-08-13. Retrieved 2013-10-18.
- Lusardi, A. et al. (2010). The NEFE quarter century project: 25 years of research in financial education: Theme 1: Promising learning strategies, interventions, and delivery methods in financial literacy education. www.nefe.org/quartercenturyproject
- Mezirow, J. (2000). Learning to think like an adult: Core concepts of transformation theory. In J. Mezirow & Associates (2000). Learning as transformation (pp. 3–34). San Francisco, CA: Jossey-Bass.
- Xiao, J.J. et al. (2010). The NEFE quarter century project: 25 years of research in financial education: Theme 2: A Review of financial behavior research: implications for financial education. www.nefe.org/quartercenturyproject
- Prochaska, James; DiClemente, Carlo; Norcross, John (1992). "In Search of How People Change". American Psychologist. 47 (9): 1102–1114. doi:10.1037/0003-066x.47.9.1102.
- Wolfsohn, R., & Michaeli, D. (2014-02-03). Financial Social Work. Encyclopedia of Social Work.
- "Improving Financial Literacy – Analysis of Issues and Policies" OECD 2005
- Lucey, T. A., & Cooter, K. S. "Financial Literacy for Children and Youth"
- Federal Reserve Bank of San Francisco. "Community Investments: Financial Education" 2009.
- M. Schuhen / S. Schürkmann: "Construct validity of financial literacy", International Review of Economics Education, Elsevier, Amsterdam 2014.