finance essay examples

finance essay examples

The Importance of Financial Education

1. The Impact of Financial Education

I contribute to this literature by providing evidence on the effects of financial education in an emerging market. Furthermore, my research directly quantifies some of the potential impacts of a specific type of education, as most studies do not list possible effects of financial education. Finally, my work specifically examines the impacts of financial education for micro-entrepreneurs. While there is work examining how financial education can impact various investing and saving behaviors in other demographics, there is little evidence of how it might impact saving behaviors and formal credit use, which are crucial issues for micro-enterprises.

The results of this research are important because, at least in the case of personal savings, they indicate that education in financial matters could have widespread and relatively fast impacts. Evidence generated from Colombian firms that were required to provide financial education helps quantify the impacts of this requirement. There is a growing literature that examines the potential for financial education to affect financial behaviors. While evidence of the effectiveness of financial education can be found in developed and developing countries, there is one important outlier. A study found that a demand-side financial education program had no impact on financial behavior in the Philippines.

Many recent studies have found evidence supporting the effectiveness of financial education initiatives. For instance, a study found that simply taking a course in personal finance led to an increase in self-reported savings. This study shows that, in addition to understanding basic financial concepts, financial education also has an impact on behaviors.

2. The Benefits of Financial Literacy

Financial education provides economic, financial, personal, and work benefits for the entire population. Economic benefits are mainly reflected in the promotion of savings because the person has greater financial knowledge, being better informed about the opportunities and risks associated with investing money. Personal development also evolves, since the person becomes more organized and begins to set goals to achieve their financial stability. In cases of financial difficulties or debts, the individual benefits from the capacity for decision-making, since he can find solutions to not create problems in the future. The increase of economic benefit is closely linked to labor rights, since the employee who plans the future can choose the conditions of work in the company, reducing the possibilities of job risks. In this sense, financial education is essential for the country’s democratic development. In its role in education, the state must enable people to exercise their potential and thus decrease social inequalities. Therefore, it is necessary to comprehend the role of schools and the effective development of the National Education project to invest in financial education. This development is essential to empower citizens and foster individual and collective transformations.

In economic crises, families who know how to manage their finances go through much less difficulty than those who do not know. Having knowledge about financial education is important so that people can make better use of their salary or income, in addition to being able to plan the future. The concept of financial education is one in which people learn about money, credit, savings, and investment, so they can make more informed decisions about how to handle their finances. Education involves money and credit management, expenses and savings, among others, giving the citizen control over his own life so that they become independent in the future.

3. The Role of Financial Education in Personal Finance

The results shown in the work found that the knowledge of personal finance has a positive relationship with age, education, occupation, and gender. To the extent that an individual is older, the level of education is higher, may have a financial product, and the gender variable is also female, those who have better finance knowledge. On the other hand, financial education is positively related to age and education. In the sense that the greater the average age and educational level of the population of the Republic (greater access to defense mechanisms such as CONDUCEF or the financial education programs), consequently, they have higher financial literacy. Furthermore, in the section of education, two variables are positive: the degree of public educational positions and the training in financial education. They also found that the level of education in personal finance and financial education improves.

Mireya Jasso Aspe and colleagues conducted research in which they investigated the relationship between the level of knowledge in personal finance and financial literacy with respect to several variables related to gender, age, occupation, and educational level. This study was carried out during the months of October to December 2014, with a questionnaire comprising standardized questions that were evaluated by the National Commission for the Protection and Defense of Users of Financial Services.

4. The Connection Between Financial Education and Economic Growth

Education, from this perspective, endorses also formal education and not only the concept of human capital but may represent future’s investment in the children, such as expenditures for books, stationary, and private tuition. If the probability of children staying in school is related to household spending on education, then we need to note that the interaction between the environment and financial education also impacts economic development. Parents may have the power (to spend more or less on their children’s education) that depends on the kind of decision they need to take, their level of financial education, the context, and how they value investment in education, from now and in the future. This connection becomes even more important in line with today’s realities: in a changing world, financial education offers individuals a foundation of knowledge, cognitive ability, and emotional self-control, by which they can navigate through economic life and become more resilient to the gamut of social and economic problems that parenting imposes.

Economies depend profoundly on human capital: economies are fueled through that complex of demographics, intellectual assets, health (both physical and mental), education, and wellness. A country that makes good use of its inhabitants’ capacity sees improved economic performance compared to a country that neglects the elements of human capital. The contribution of a proper educational system to economic growth is a fact known since the works of economists such as Theodore Schultz, but the way the increasing body of knowledge can be used and transformed in practice into innovation and productivity growth requires today paying special attention to these mechanisms instead of looking only at investments in knowledge.

5. The Need for Financial Education in Schools

5.2 The Need for Financial Education in Schools: The fragmented nature of financial literacy, and the necessity of accumulating information over time that is influenced by the unique preferences and background of each decision-maker makes it challenging to form a cohesive financial education program. An appropriate program cannot possibly be one-size-fits-all. Rather, a financial education program might need to account for such things as whether the individual student is in elementary, junior or senior secondary education; whether that student attends a vocational school, junior college or a traditional high school; and whether they go to a public or private school. Different students likely need to know and understand different things as well as to be equipped with different attitudes and abilities. Balancing these myriad factors and ensuring that financial education actually prepares students for what they need to know, understand and evaluate is a difficult task that could nevertheless ultimately provide substantial benefits.

5.1 Introduction: We address recent academic research on whether financial education can be effective at improving important financial decisions and changing long-term financial behavior, and the connection between research and policy. We examine work on both foundational questions and more advanced concerns that have emerged in the literature. Throughout, we emphasize empirical identification challenges, recognizing that research findings have deeply impacted how scholars and practitioners view financial education, and its potential to affect decision-making and overall financial well-being.