Why financial literacy matters
Low financial literacy impacts individuals and society in more ways than you'd think. Find out why building yours matters.
In a world where information has never been more accessible, people are showing lower levels of financial literacy than ever. This gap often leads to impulsive spending, limited saving, and missed warning signs of financial distress. A lack of understanding of concepts like interest rates or compounding can make it harder to manage debt and maintain financial stability later in life.
According to the latest OECD/INFE (OECD International Network on Financial Education) survey across 39 countries, adults worldwide share surprisingly similar blind spots when it comes to financial knowledge:
Source: OECD/INFE 2023 International Survey of Adult Financial Literacy
The impact of money worries on your mental wellbeing
This lack of awareness affects more than just your bank balance. Uncertainty about your daily expenses and future financial situation can cause ongoing stress. In other words, money worries tend to weigh heavily on your overall wellbeing.
The good news: improving your financial literacy can make a real difference, at any age. Research shows that even a basic understanding of financial concepts and money management helps people make better money decisions, avoid risky behaviour, and build long-term financial wellbeing.
Financial literacy: what does it mean?
Before we get into how to achieve this yourself, let’s get on the same page about what financial literacy actually means. Financial literacy might sound daunting, but it comes down to the small decisions you make every day.
What is financial literacy?
Financial literacy is the knowledge, skills and attitudes needed to make smart financial decisions and achieve personal financial wellbeing.
Of course, there are some factors around financial wellbeing that you have less control over – like your inflation or the economy – but being financially literate will help you create the best financial situation out of the cards you’ve been dealt.
How financial literacy supports your wellbeing
Higher financial literacy can help you:
Avoid unhealthy financial habits. Understanding the risks associated with borrowing, overspending, or investing without a plan can help you recognise bad choices. | |
2. | Feel properly informed in everyday life. Understanding the financial concepts and processes related to work, studies, banking or housing can help you feel in control. |
3. | Stay in control of your spending. Knowing just how much money you have to spend on different things can help you enjoy your life while setting aside money for the future. |
4. | Strengthen your financial resilience. Having the right amount of money saved as a buffer can help you withstand the negative impact of a large and unexpected cost. |
5. | Take care of your future self. Putting aside money for the future in a way that suits you will give you confidence in your financial future. |
A basic level of financial literacy can help you avoid: