Mar 1, 2012

Financial literacy

Some benefits of it:
Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Individuals with higher rates of financial literacy are significantly more likely to report having more unspent income at the end of the month and higher spending capacity. The relationship between financial literacy and the availability of unspent income is more evident during the financial crisis, suggesting that better financial literacy may better equip individuals to deal with macroeconomic shocks (Klapper and Lusardi 2012)
"[La]ck of numeracy is not only widespread but is particularly severe among some demographic groups, such as women, the elderly, and those with low educational attainment" (Lusardi 2012). Donohue (2012) offers a critical view. See also this abstract (2012) on the challenges of financial literacy among "millennial consumers." 
See also this report (2009)  that claims that FL is critical for promoting access to finance in developing countries. 
If financial literacy is that important, one wonders how can it be improved. It seems that lack of financial literacy is a part of a wider problem: a problem with basic education in general. But there might be some intriguing policy recommendations. Think about the possibility of financial literacy across the curriculum in primary and secondary schools. The other response can come from social entrepreneurs. There are some examples:
The Heartland Institute, (US).
Hazel Joyce Wiley, (US). 
I don't see much being done in developing countries. There are some exceptions.

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