Useful Resources for Financial Literacy

The purpose of this blog post is to stress the importance of financial education (literacy) by gathering valuable resources that will help both youth and adults get a better understanding of finance.

I chose to write about financial literacy as lack of it represents the basis for most of the legislation and regulation initiatives. With products getting more complex the consumers are more vulnerable to mis-selling. Also, this is no secret consumers may show irresponsibility in their financial decisions.

I often tend to compare financial literacy to driving competency. The authorities can enhance the infrastructure, regulate speed and enforce the behaviour on the road, put more signage, strengthen the license eligibility process and expand police presence but it won’t necessarily be more effective than the driving education provided by parents, schools, authorities or the media.

A study conducted by the Money Advice Service (UK) confirmed that the adult money habits are set by the age of seven years old. The study showed that by the age of seven most children recognize the value of money, understand that money can be exchanged for goods and are capable of complex functions such as planning ahead and comparing between choices. Despite the conclusion above, this study also shows that children under the age of eight haven’t developed an understanding of the differences between ‘luxuries’ and ‘necessities’.

Another study conducted by the FINRA Investor Education Foundation (USA) showed that young millennials (ages 18 to 26) display low level of financial literacy, engage in problematic financial behaviours and express concerns about their debt.

It hasn’t been a surprise that the Financial Crisis Inquiry Report concluded a combination of excessive borrowing, risky investments and lack of transparency put the financial system on a collision course with the 2008 crisis. In conjunction with other outcomes, the report concluded that households were left vulnerable to financial distress as their mortgage debt doubled while wages remained the same.

The timing of this article is not random as we’re approaching the summer break period across the world. Youngsters are going to start their summer vacation and some of them will be starting their summer jobs.

The CFPB (US) addressed this matter in their recent publication stating that “For young people, particularly those between the ages of 16-24 who may be entering the workforce for the first time, developing good money management skills is critical. Without the necessary financial knowledge and skills, many will not develop money management habits, trapping them in a future with limited savings, high debt, or compromised credit.”

I believe with appropriate financial education some people could have avoided financial incapability.  Therefore, I decided to gather several resources that can help households (both youngsters and adults) who want to learn and teach finance. This list can be also used by financial institution who want to provide added-value services and organizations that want to offer valuable educational resources.

Are you familiar with additional useful resources?