viva finance

viva finance

The Importance of Financial Literacy in Today’s Society

1. Introduction

This study is an exploratory one and aims to provide, for the first time, a comparison between women and men concerning Financial Literacy, Debt Management, and Economic Hardship. The Financial Literacy Questionnaire consists of 17 questions, the Debt Management Questionnaire consists of 14 questions, and the Economic Hardship Questionnaire consists of 7 questions. A number of 200 consumers, 100 women and 100 men, of various academic backgrounds were asked to participate in a survey. The results show that women scored lower in all questionnaires. We propose efforts for women to enhance their ability to make informed evaluations and effective decisions regarding the use and management of assets, debt management, and their ability to manage the risks associated with debt-related issues, as well as their ability to use assets in an effective manner. This can also help women to develop the ability to perform the financial tasks needed at various life stages, as well as to increase effective workforce participation of women. The following study limitations should be considered. One significant limitation has to do with our inability to generalize our findings beyond the recruitment source.

It is of utmost importance to be financially literate today. In order to have a sustainable financial well-being, one needs to be knowledgeable in investing, management of debt, savings, banking services, wealth transfer tools, and protection from unexpected expenses. One should be able to set long-term and short-term goals, have a spending and saving plan, as well as being able to understand the principles of investment risk, have proper retirement planning, and be able to select mortgages. Financially literate consumers can accumulate assets and have a more stable economic future. Financial literacy can be a reality through education, discipline, and effort.

2. Understanding the Basics of Personal Finance

Finally, Cambridge-Isanti High School near Minneapolis, Minnesota teaches a financial course where hundreds of students are required to understand the basics of personal finance. This includes interest rates, credit cards, credit ratings, budgeting on wages and salary, fundamental checkbook management, using credit on buying a vehicle, and each lesson builds on another.

Simply put, there are not enough people who understand how finance operates. A study conducted by College Factual in 2019 that explored the best college tuition educational studies programs with at least 1,508 degrees drawn from the National Center for Education Statistics found that out of the 261 United States colleges looked into for that research, Princeton University ranked the highest with a financial literacy score of 82 points, and Arizona State University-Tempe came in last due to a score of 5 points. The researchers clearly found a disparity in points reflecting an appreciation of financial literacy with respect to different colleges. The study defined financial literacy as “knowledge and skills related to managing personal finances.”

In 2007, a group of eight international political leaders from established and emerging market countries met to discuss the state of the world’s economies, particularly the global financial state, and they identified personal financial literacy as a central solution to this global problem.

This type of class should be taking place within our high school’s curriculum, and it should be a requirement that we, as students, take it at least once before graduating. This will allow us to have a basic understanding of finances so that when we go off on our own, we will know how to run a household properly. It is urgent that we take classes so that as we go out into the adult world, we know how to handle our finances in a correct and mature manner.

3. Investing for Financial Growth

If financial knowledge grows, individuals will also gain greater capacity for analysis and, consequently, will demand less standardized products and services, adapted only to their real needs. Consequently, the pressure and profit margin of banks and other operators will become slimmer, while driving competitiveness and launching new products will encourage innovation and stimulate the economy. According to opinion polls, employees would also like to receive this kind of information in the workplace, as they recognize that such support could help them make well-informed decisions. The improvement in employee well-being would directly promote productivity. Money is an important component in our lives and it goes far beyond keeping us alive from our home’s perspective. Life is related to many experiences and one of the most common root causes of stress is the feeling of financial insecurity. Confidence in their current and future state increases our ability to save more and improves our ability to consume without regrets.

Back to top. In addition to the multiplication factor at the individual life level, when thinking in broader terms and taking into consideration that your savings are an important part of the economy and directly impact the overall capital that companies and governments have available for their activities, it is clear that the more knowledgeable and capable in a certain area the population of a country, the wealthier and more sustainable its society. And, as with anything we want to improve or learn, investing in education is essential. The lack of basic knowledge and experience in the field of personal finance leads many people to always look for the same solutions for their money, and this condition generates a competition in prices and worse conditions for these same solutions, extremely advantageous for banks and other financial bodies.

4. Navigating the World of Credit and Debt

Even among the educated few, understanding how debt operates and the long-term effects of decisions made is often not well understood. Traditional methods for teaching students about the basic elements of personal financial management are not integrated. Students will struggle later in life if only exposed to financial management when applying for a credit card or loan. It is important to learn early about the “cost of money” and “financial consequences”. If not skillful in managing credit wisely, people may be reported as “disapproved” by a credit bureau such as Equifax, Experian, or TransUnion. These organizations are used by lenders whenever a credit decision is made. The worst case scenario is having a Chapter 7 bankruptcy filed against you. This record appears on your credit report for up to 10 years.”

“In comparison to the generation that lived through the Great Depression, a dramatic shift has occurred in the way we now borrow money. The motto “Neither a lender nor a borrower be” is outdated in today’s world. The use of credit is unavoidable in today’s society, and it is important to understand the terms associated with credit. Americans are accumulating an increasing amount of consumer debt annually. Much of this is placed on the credit card. As such, understanding how credit cards operate is crucial. Credit cards are similar to a short-term loan. When a credit card transaction is made, the merchant immediately receives authorization for the payment (providing the charged amount is under the credit limit). Later, the issuing bank provides the merchant payment for the amount of the transaction less the processing fee. At the same time, a statement is sent to the credit card holder, including the posting of the transaction (to the customer’s account). This often occurs sometime after the transaction is made. This lag time is referred to as the “float”. The customer’s payment to the bank is due forty-five days after the cycle end in which the transaction appears. However, if at least the minimum monthly payment is paid, the remaining balance can be carried over to the next cycle. In such case, the bank charges interest on the beginning balance of this new cycle equating to the unpaid balance from the previous cycle. Often, these cycles compound monthly at rates ranging from 12% to as high as 29%. Suspicion should be raised when offered a low initial interest rate. This is likely an “introductory rate” that expires after a certain number of months. The bank will increase the rate after the customer is “hooked”.

5. Building a Strong Financial Future

The United States, the largest economy in the world, has a savings rate that is negative and a credit card burden that is estimated at three-quarters of the national debt. These and other statistics are indicative of financial behaviors that are less than optimum. Certainly, building a strong financial future in the United States is essential, but knowledgeable investment risks are needed. Unfortunately, recent studies found that Americans lack even a basic understanding of the stock market. Furthermore, in developed nations, the lack of ability of citizens to use financial puzzles is apparent. Without this insight, many would-be investors will either refuse to participate in the stock market or will do so in ignorant or nonsensical ways. Without informed investing, future homeowners will not be able to build wealth. Because so many individuals believe that saving instead of investing will enable them to achieve their significant (pensions) long-term financial goals, the societal implications of poor financial decisions are severe.

Financial literacy can empower us, as individuals, and as a society. Through effective financial decision-making, we gain the ability to shape our financial futures and improve our communities. Moreover, financial literacy will empower us to manage our resources more effectively in the face of both personal and societal stock market crashes. Financial literacy is even more critical in today’s fast-paced and complex environment. With the traditional future employment paradigm shattered and uncertain financial futures, today’s individuals, including young people, must take uninformed risks and become long-term investors if they hope to achieve future financial goals. Unless these goals are reached, the future society and economy of the United States may be in jeopardy.