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Financial Literacy: a Survival Must That Should Be Taught

Popov, A. (n.d.). [Different piles of coins with miniatures of a house, a plain, rings on top] [Photography] (iStock). Expansión.

There is no clear-cut way to know what is going to be the best advice for a person trying to do better with their personal finances. However, there are certain basic concepts that everybody should learn. These concepts could certainly help people get rid of their money-fear and manage their finances more wisely.

According to the Cambridge Dictionary, financial literacy is “the ability to understand basic principles of business and finance”.

On 2020, the OECD undertook an international survey of adult financial literacy that involved a total of 125.787 adults aged 18 and over from 26 countries and economies, and some of the outcomes presented that:

About half of the EU adult population does not have a good enough understanding of basic financial concepts. While the overall figures are low, the problem is more acute in some parts of society than others, with the most vulnerable disproportionally affected. Low-income groups, for instance, as well as women, young people and older people, tend to score lower than the rest of the population when it comes to financial knowledge.

The above statement should worry us all. Whether we like it or not, managing money and finances is part of our daily life. Yet most of the global population does not have a minimum knowledge of financial concepts (i.e. basic concepts such as debt, credit, how to manage household expenses, savings, and investments).

With no financial education, how are people supposed to understand the risks of borrowing money for college, constituting a mortgage, or accepting a new credit card at the very least?

Uong, M. (2018). [Blackboard with economic and financial drawings] [Illustration]. The New York Times.

In the words of the European Commission:

Everyone should be able to understand the risks involved when borrowing or investing money. Financial literacy can help individuals plan for the future, make better decisions about what to do with their money, and invest in capital markets in a way that meets their needs. […].

Financial literacy also protects individuals from over-indebtedness, excessive risk-taking, fraud, or cyber risks. Financial education complements consumer protection, but does not replace it.

If financial literacy helps people's wellbeing and limits financial struggling, should not financial literacy be taught at school? Are parents expected to teach something they do not know about?

Unknown (2020). 4 reasons financial education is important at a young age. India Today.

Considering the above and following some research, here are some common suggestions on how to start improving financial literacy:

1) Learn, talk, and teach about finances

There is currently no measurement for financial standards and metrics to see how good or bad our household finances are. Plus, most of us have grown up in an environment where talking about money is seen as disrespectful or even rude. Sometimes, sharing the struggle to make ends meet is deemed as embarrassing.

Financial struggle is one of the reasons people are stressed. In order to learn a better way to manage finances, learning and communicating about it is necessary. Fear, embarrassment or social customs should not be the reason why people shy away from learning about managing finances.

Talking about this with friends and family can be a good start to become aware of how your surrounding manages and deals with their finances. Some other options can be to take short specific lessons about subjects of their concern (reading a book, listening to a podcast, webinar or actually taking a supervised course with other people with similar concerns). One of the advantages of Internet is the availability of information, the difficult part is to focus on what you want to obtain from it.

Once you know more about a topic, spread the word to your loved ones.

2) Financial planning/budgeting

Learning how to create a budget based on income, expenses, and objectives in the short, medium and long term is a practical way to picture where a household economy stands. The budget could work as a basic tool to determine which expenditures can be cut off and whether there is room for savings. Knowing the limits can help to implement realistic approaches while facing inevitable expenses (i.e., rent, taxes, groceries, etc.).

3) Integrate a "saving before spending" philosophy

Spending is easy, specially within environments that constantly offer you new products and services. Acquiring the habit of saving, however, requires a bit of time and willingness. Besides learning about how to save and invest money, somewhere to start is to allocate a part of the monthly income for this purpose.

Saving does not need to start with large amounts. However, choosing not to save is a risk to not be able to face the unexpected or invest in a medium to long term objective. A handy way to save some money could be to set up the automatic allocation of a part of the salary to a savings account. Not having to actively think about transferring money into savings prevents the desire to spend it.

Keeping a close eye on where most of the expenses come from also helps. Can those expenses be reduced? Can plans be rearranged in a better, cost-efficient way? If so, it is worth doing it, maybe not all of them at once, but step by step. Furthermore, now that subscriptions to services and products are everywhere, monitoring them can prevent someone paying for more than they actually need, and help them reflect on whether they need that subscription at all.

4) Limit debt

Financial institutions can be a great help when in financial need, but let’s not forget that their business is to make money. They can help afford payments and investments that otherwise would not be possible for families to pay all at once. However, borrowing money from them means giving it back with interests and under a repayment schedule. Special care need to be put on interest rates and other costs included in the agreement terms.

In the U.S., most of the students finish college with a student debt of more than $30,000. Without having even started their professional careers, they already have a significant debt to face and little to none financial literacy.

Before accepting any new credit card or financial product, the first question to answer should be: "Am I going to be able to repay the amount due in time and without putting myself in an uncomfortable economic situation?", "Is this new thing worth financially burdening myself? (i.e., to get a new TV, clothing, the latest smartphone, to go on vacation, …)", "How much will I end up paying for this credit?".

A high pressure on debt leaves little to no room to deal with unexpected events, but also contributes on increasing emotional stress.

Qadir, G. (2021). Budgeting, the most important financial skill. BizPlanShop.

Financial independence is key to the population’s wellbeing and independance. Getting out of a bad financial decision is hard, but it is worse if there is no possibility to rethink and adjust the situation, which can lead to bad physical and mental health issues. Therefore, taking some time to learn and educate ourselves about financial literacy is a must, and in the long-term, will come cheaper than doing nothing.


OECD. (2020). Launch of the OECD/INFE 2020 International Survey of Adult Financial Literacy. Financial Education.

Wong, K. (2018). We’re All Afraid to Talk About Money. Here’s How to Break the Taboo. The New York Times.

Herrera, T. (2020). 3 Simple Things You Can Do Today to Improve Your Finances. The New York Times.

Torres-Haddad, N. (2018). The Foreign Language of Financial Literacy [video]. TEDx.

Johnson, M. (2014). Assessing Financial Literacy Education. The Huffpost.

Harvard College. Financial Literacy Guide.

Carson, R. (2021). 6 Ways To Boost Financial Literacy And Empower Your Financial Future. Forbes.

Rodriguez Valladares, M. (2020). Financial Literacy Is More Essential Than Ever. Forbes.

Illustration references

Popov, A. (n.d.). [Different piles of coins with miniatures of a house, a plain, rings on top] [Photography] (iStock). Expansión.

Uong, M. (2018). [Blackboard with economic and financial drawings] [Illustration]. The New York Times.

Qadir, G. (2021). Budgeting, the most important financial skill. BizPlanShop.

1 Kommentar

Billi Jean
Billi Jean
03. Dez. 2023

Thanks for article! I believe that such articles on financial literacy are very useful for people without special skills and experience. And if you want to improve your material status, you must constantly develop in this direction. And here side hustle ideas which I recently read in a reputable blog. But I want to remind you that making money takes time, effort and patience. Reading articles is just the beginning. It is necessary to constantly update your knowledge and look for new ideas to develop your financial skills.

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