Why is financial literacy essential for success in the modern economy? (2024)

Key takeaways from this article

• Track financial health:

  Understanding key financial indicators, such as cash flow and profit margins, is central to navigating a business to success. It lets you make informed decisions that directly impact your company's growth and stability.

• Invest for the future:

  Learning how the financial markets operate empowers you to invest wisely. This knowledge can help grow your net worth over time, creating a more secure financial future beyond just earning a salary.

This summary is powered by AI and these experts

• Frannie Leautier Senior Partner and CEO SouthBridge…
• Kathleen Owens Financial Planner | Fiduciary |…

• • Report contribution
  Financial literacy, from my perspective, is an indispensable element in everyone's life and a prerequisite for both personal and financial growth. I firmly believe that enhancing financial literacy is crucial for individuals across all professions, as it serves as a valuable asset in every facet of life—be it personal, mental, or financial.An individual well-versed in financial matters can make informed decisions regarding their finances, accumulate wealth, and focus on other life priorities without succumbing to anxiety and uncertainty. In essence, nurturing financial literacy empowers individuals to navigate their financial landscape with confidence and foresight, contributing significantly to their overall well-being.

  Like

  20

• Shakeel Jeeroburkan ACSI Snr Fund Accountant at Fidelity International - 2023 Apprentice of the Year Award Winner (Finance Category)

  • Report contribution
  Financial literacy contributes significantly to psychological wellbeing by enabling a sense of empowerment and autonomy. Understanding financial concepts equips individuals with the tools to make informed decisions, reducing feelings of helplessness in financial matters. This empowerment leads to greater peace of mind, as individuals are better prepared to handle financial uncertainties and challenges. Furthermore, the confidence gained from financial literacy can spill over into other areas of life, enhancing overall wellbeing.

  Like

  8

• Pablo Escobar Fior LinkedIn Top Voice Finanzas 2024 | Director Financiero | Cash Management | Negociación | Reestructuración | Transformación Digital

  • Report contribution
  El dinero depende más de la psicología que de las finanzas. Lo curioso es que la formación que recibimos sobre cómo gestionar nuestro dinero está más enfocado a “entenderlo” como si fuese una ciencia pura y dura, a que si se tratase de una habilidad blanda (soft skill), ligada directamente con nuestras emociones y vivencias.Es por esto que la educación financiera debe combinar lo teórico con su puesta en práctica y así poder mejorar nuestros hábitos (cultura financiera).

  Translated

  Like

  6

• Sunny Sabharwal Chartered Accountant | Empowering businesses with strategic financial insights | Passionate educator Bridging theory and practice

  • Report contribution
  In a world where there are tons of advice on earning, we miss out basics of financial management or prudence.Eg, People get im debt trap not because of low income but their earnings < aspirations or women largely depend on their male relationships (father, husband or son) for handling their investments. Just using common sense and a bit of financial concepts can save us from millions of troubles. For more, one can read Psychology of Money.

  Like

  6

• Suchan Shetty Analyst | Investments | Debt Capital | Engineer

  • Report contribution
  Exactly, Financial literacy is a valuable skill that enables individuals to navigate the complexities of the modern economy, make informed decisions, and contribute to their own financial well-being as well as the overall economic stability.This is even more critical when information is abundant and paradigm shifts in the economy can happen in a shorter span of time, so being financially literate is a game changer for both entrepreneurs as well as common individuals.

  Like

  5

• Kirtan A Shah LinkedIn Top Voice | Wealth Management | Financial Education

  • Report contribution
  3 very important aspects here,- it helps you structure your salary well to lower the tax impact- it helps you invest well to save more tax- It helps you understand how and when ESOPs can be of help and hence select that as an option over cash salary component.

  Like

  42

• Shakeel Jeeroburkan ACSI Snr Fund Accountant at Fidelity International - 2023 Apprentice of the Year Award Winner (Finance Category)

  • Report contribution
  In the context of career development, financial literacy serves as a key enabler of professional growth. It equips individuals with the acumen to understand and navigate the financial aspects of their industry, enhancing their value to employers. For entrepreneurs, financial literacy is crucial for making sound business decisions and securing funding. In many professions, the ability to manage budgets, forecast financial outcomes, and understand market trends can distinguish an individual as a leader, opening doors to career advancement and opportunities.

  Like

  7

• • Report contribution
  As a certified financial planner, I've observed how financial literacy can significantly boost career growth. Understanding the economy and business operations helps you make strategic decisions and spot opportunities. It’s more than money management; it’s about understanding industry changes and negotiating better salaries. Financial literacy also hones critical skills like problem-solving and effective communication, making you a valuable asset in any job. It’s a multifaceted tool for professional advancement

  Like

  3

• • Report contribution

  See Also

  Americans Continue to Name Inflation as Top Financial ProblemRelationship between financial literacy and spending habits? | 4 Answers from Research papersHow Literacy is Influenced by and Influences SES – Michigan Journal of EconomicsFinancial Literacy and Economic Outcomes: Evidence and Policy Implications
  Elevating your financial literacy extends its benefits to your professional journey. Insight into economic dynamics, business operations, and financial markets equips you to make informed decisions, fostering career growth. Negotiating salaries, navigating taxes, and diversifying income streams become more manageable with financial acumen. Beyond these practical advantages, financial literacy also hones essential professional skills like critical thinking, problem-solving, and effective communication, amplifying your overall professional aptitude.

  Like

  3

• João Candido P. de Castro Neto Sócio proprietário na Castro Neto Consultores Associados Ltda.

  • Report contribution
  Uma educação financeira adequada ajudará a ter uma vida financeira saudável. Isso trará impactos relevantes, não apenas para a sua vida pessoal, seus objetivos e segurança, mas também para os objetivos e segurança da sua família. Um ambiente financeiramente saudável e seguro é essencial para a construção de um futuro de prosperidade para seus filhos.

  Translated

  Like

  2

• • Report contribution
  Understanding how financial markets work is an important piece to a person's financial literacy. The US financial markets have enabled investors to participate in the innovation of public companies, and through that innovation, the ability to grow a sufficient net worth. A salary alone, is usually not enough to be able to retire comfortably.

  Like

  2

• Kelvin Saegussa Financial Planner | Linkedin Top Voice| Wealth Management | Financial Education | Valuable Young Leader

  • Report contribution
  If the entire society has a high level of financial literacy, then the rational agent theory becomes closer to reality. Therefore, the government agents have more predictability to take their actions from a public policy and monetary policy perspective, for example. The rational agent theory states that individuals aims to perform optimal financial decisions based on given premises and information. For instance, if the rational agent knows that the interest rate is raising, then it might not be a good idea to borrow more money.

  Like

  11

• Pablo Escobar Fior LinkedIn Top Voice Finanzas 2024 | Director Financiero | Cash Management | Negociación | Reestructuración | Transformación Digital

  • Report contribution
  Una mejora en el nivel general de educación financiera de una sociedad, es algo beneficioso para todas las partes, ya que un mayor conocimiento sobre como gestionar y "comportarse" con el dinero (algo que tenemos que hacer todos los días de nuestra vida) impulsa su progreso y de ahí la importancia de comenzar desde edades tempranas. No hacer lo suficiente, solo lleva al desarrollo de una sociedad más "pobre", en todos sus sentidos.

  Translated

  Like

  7

• • Report contribution
  Knowing how to handle money isn't just about personal gain; it's a team effort. When people can navigate their finances well, it's not just beneficial for their individual wallets but also for the workplace. Being financially savvy makes us all better decision-makers on the job.In the big picture, getting a grip on financial know-how is like giving society a safety net, making us collectively more financially resilient. Moreover, when everyone is on the ball with money matters, it's a win-win for society – not just stable financially but also boosting that GDP for everyone.

  Like

  4

• • Report contribution
  An individual's financial literacy extends its impact beyond personal realms, fostering positive contributions to society. Actively participating in economic growth through tax contributions, job creation, and support for local businesses becomes possible. Moreover, being financially literate allows for informed engagement in the democratic process, advocating for responsible policies and exercising the right to vote. Additionally, this knowledge empowers individuals to support social causes and environmental issues, whether through donations, volunteering efforts, or ethical investments, thereby making a meaningful impact on the broader community and the world.

  Like

  3

• • Report contribution
  Financial literacy hinges on accessible information and context. Lack of economic knowledge intensifies stress in financial decisions. Investing is much more intimidating if you aren't exposed to daily moves in the market. Buying a home requires hours of researching pricing, mortgages, and rates if you're not hearing about this stuff every day. Mainstreaming economic news can boost exposure and understanding.

  Like

  10

• Pablo Escobar Fior LinkedIn Top Voice Finanzas 2024 | Director Financiero | Cash Management | Negociación | Reestructuración | Transformación Digital

  • Report contribution
  En general, cuando hablamos de educación financiera nos referimos más a incorporar nuevos conocimientos que al cambio de nuestros hábitos con el dinero. Lo ideal sería poder combinar la enseñanza teórica con su puesta en práctica. Por lo tanto, debemos buscar un equilibrio, donde una mejor formación provoque una "trans-formación" de nuestros comportamientos, ya que caso contrario, poco servirán los conceptos adquiridos.

  Translated

  Like

  5

• AMPARO RUIZ AGUILAR INSOLVENCY PRACTITIONER (EXPERTO CONCURSAL PACTITIONER) ABOGADA, ADMINISTRADORA CONCURSAL, CONSULTORA GRC EN COMPLIANZA, COMPLIANCE OFFICER

  • Report contribution
  La enseñanza financiera, al menos la más básica, debería tener el mismo peso o más que las matemáticas en secundaria. Saber organizar tu dinero, hasta donde puedes llegar y una planificación de tus ingresos (aunque sea “la paga de la semana”) , ayudaría a los adolescentes.

  Translated

  Like

  See Also

  The effect of financial literacy on business performance through mediation of financial access and financial risk attitude

  4

• Jessica K. Martini, MBA Millennial mom educating and empowering women, LGBTQIA+, and Employee Resource Groups to give them a fair shake in this world.

  • Report contribution
  There is an oversaturation of information out there. Women, LGBTQ and BIPOC individuals are paid less, and have different needs for financial planning because the systems were not designed with them in mind. Find an advisor who can support your individual goals and lived experience.

  Like

  4

• Tessabella Jelten House of Agents Academy by Tessabella | Founder of ONIN Tech

  • Report contribution
  Financial literacy faces hurdles globally. A mere 38% achieved basic proficiency in a 2018 OECD survey. Accessibility to quality education remains a challenge, especially for marginalized groups. Lack of interest, trust issues with financial institutions, and time constraints hinder financial learning. Complexity, fear, and misinformation contribute to these barriers. Bridging these gaps demands tailored approaches, addressing diverse needs, making financial education engaging, fostering trust, and integrating practical applications into everyday life. The goal: democratize financial literacy for everyone, everywhere.

  Like

  3

• Frannie Leautier Senior Partner and CEO SouthBridge Investments

  • Report contribution
  An example of where financial literacy makes a big difference relates to founders and leaders of startups and small and medium enterprises. Being able to tell your company story via the financial results helps you get access to finance. Knowing how much it costs to deliver your service or make your goods allows you to properly price your goods and services. Being able to spot trends and project future financial performance helps you play smarter than the competition.

  Like

  37

• Nilendra Vithanage Chief Manager - Zonal Head at National Development Bank PLC (NDB). Lecturer, Economic Analyst and Strategy Business Partner

  • Report contribution
  In my experience financial literacy is the foundation for the financial independence. Where the freedom of finance is achieved through relentless adherence to core values of proper conduct in having financial goals, strategies of financial achievement and management of wealth.

  Like

  18

• Pablo Escobar Fior LinkedIn Top Voice Finanzas 2024 | Director Financiero | Cash Management | Negociación | Reestructuración | Transformación Digital

  • Report contribution
  Es una realidad que la educación financiera no tiene (casi ninguna) presencia en los colegios y es en la propia familia en quien recae la “responsabilidad” de enseñar y transmitir a nuestros hijos, los conocimientos y hábitos financieros, por más básicos que estos fuesen.El problema es que generalmente los padres no hablamos con ellos, sobre cuáles son los ingresos de la familia o en qué gastamos nuestro dinero.Por lo tanto, ¿no deberían ser las familias los principales destinatarios de los programas de educación financiera, y poder así mejorar en el futuro el nivel de nuestros hijos (y de la sociedad en general)?

  Translated

  Like

  7

• • Report contribution
  Overcoming financial literacy challenges is attainable through proactive strategies. Seek guidance from reliable sources, set achievable goals, and monitor your progress diligently. Experiment with different financial products and services to grasp their costs, benefits, and risks. Building a community or network with shared financial interests provides valuable insights and mutual support. Lastly, don't hesitate to reach out to family, friends, colleagues, or experts for feedback and assistance when navigating financial challenges or seizing opportunities, fostering a collaborative and informed approach to financial well-being.

  Like

  3

• Tessabella Jelten House of Agents Academy by Tessabella | Founder of ONIN Tech

  • Report contribution
  Overcoming financial literacy challenges involves seeking diverse advice, setting achievable goals, and tracking progress. Experiment with financial products to understand costs and benefits. Joining or forming a community fosters shared financial learning. Seek feedback from peers, friends, and experts to navigate challenges and seize opportunities. The key is a proactive, collaborative approach to enhance financial understanding and decision-making. Remember, financial literacy is a journey—learn, adapt, and grow financially.

  Like

  2

• Ibrahim Muhanna FIA, FLAA, MSAA, FCAA, FAST, FASZ

  • Report contribution
  Financial literacy is imperative not only to promote financial instruments but also arms the society from greed preople. Much more could be elaborated.

  Like

  11

• Tessabella Jelten House of Agents Academy by Tessabella | Founder of ONIN Tech

  • Report contribution
  Embarking on your financial literacy journey involves self-assessment, focused learning, and practical application. Identify strengths and weaknesses through quizzes or surveys. Pick specific topics to delve into, utilizing resources of interest. Develop a plan to optimize your financial landscape. Challenge yourself with simulations or projects. Celebrate milestones and share your journey with others. It's not just about learning; it's about applying newfound knowledge to shape a financially savvy future.

  Like

  3

• Dr. Amos Mensah Ph.D. in Agricultural Economics | Senior Lecturer at DAEAE | Professional Experience in Agriculture Sector | General Secretary GAAE | Coordinator SIRDA | Mentor and Counselor at KNUST

  • Report contribution
  Next Steps and Actions: Advocate for policies that promote financial education. Encourage community-based financial literacy programs. Foster partnerships between educational institutions, employers, and financial institutions.

  Like

  2

• Fernando Caxambu CEA Especialista em Investimentos | CEA | Gerente Regional

  • Report contribution
  no Brasil o nivel de educação financeiro é extremamente baixo, limitado e abissal, pessoas não se preocupam com o futuro e vivem em imediatismos, querendo demostrar um estilo de vida muito superior a que estão aptos a viver.modelo o qual perdura desde nossos primórdios o qual no ensino não aplica se modelo algum de educação financeira

  Translated

  Like

  1

• • Report contribution
  Starting your journey towards financial literacy includes self-evaluation, targeted education, and real-world practice. Use quizzes or surveys to recognize your financial strengths and areas for improvement. Choose particular subjects for deeper exploration, making use of engaging resources. Create a strategy to enhance your financial situation. Test your skills with simulations or practical projects. Acknowledge your progress and discuss your experiences with others. This journey is more than just acquiring knowledge; it's about putting that knowledge into practice to craft a financially informed future

  Like

  1

• • Report contribution
  Statistics paint a stark picture of the prevalence of financial illiteracy and its associated consequences. According to the World Bank, only 35% of adults worldwide can demonstrate basic financial literacy skills, highlighting a significant gap between the demand for financial knowledge and its actual possession. This deficiency has profound economic implications, as studies have shown that individuals with low financial literacy are more likely to experience debt, lack adequate savings, and struggle with financial planning.By promoting financial literacy, we invest in the future of our individuals and our collective economic well-being.

  Like

  10

• Joe Akik Wealth Manager | Bespoke Wealth Management

  • Report contribution
  In the modern economy we now have more options than ever before. This means we need versatility and speed of execution to actively assess options before we dive into them. Putting a importance on greater autonomy around financial decision making.This can even be demonstrated through research, where financial acumen and analytical skills leads to better financial literacy (Kumar et al. 2023). People with greater financial autonomy make less impulsive decisions. Their higher financial literacy improves financial capability thereby enhancing perceived well being and financial decision making.

  Like

  6

• Max Hemmings Helping Athletes Plan, Protect + Invest | Ex-Pro Footballer | Financial Advisor

  • Report contribution
  52% of adults says that money negatively impacts their mental health. Therefore, if overall financial literacy improves we’d see a major increase in mental health which could lead to increase well being of individuals.

  Like

  4

• (edited)

  • Report contribution
  In line with the OECD recommendations, an increasing number of countries are recognizing the importance of financial literacy, and have included financial education in school curricula. Financial education in schools should be part of a coordinated national strategy. I am volunteer as a judge for the InvestWrite program - an exciting companion to The Stock Market Game, challenging students to apply their newly acquired financial knowledge in an essay about long-term investing. It hones critical thinking and encourages creativity, and provides a bridge between classroom learning and the real-world. Thousands of financial professionals volunteer as judges each semester to identify and recognize the top essays.

  Like

  3

• Althea Maber Senior Business Development Manager South Africa

  • Report contribution
  Financial literacy impacts on so many elements of life including health, wealth and well-being for individuals and corporates. Creating budgets, forecasting and planning all tie in to a sounds financial plan. Tracking your goals and following and adjusting the plan as necessary throughout your life or the life span of the organization are critical to long-term success. The Financial Plan is a working document continuous adjustment, review, analysis and tweaking is critical.

  Like

  3