One definition of financial literacy is: “… having the knowledge, skills and confidence to make responsible financial decisions.” [1]

A Responsible Definition

This definition has four elements:

1. Knowledge refers to an understanding of personal and broader financial matters;
2. Skills refer to the ability to apply that financial knowledge in everyday life;
3. Confidence means having the self-assurance to make important decisions; and
4. Responsible financial decisions refers to the ability of individuals to use the knowledge, skills and confidence they have gained to make choices appropriate to their own circumstances.

Of the four, the last is the most important. Being accountable for one’s self includes seeking out the knowledge, skills and confidence to be responsible. What happens though if responsibility becomes passé, how do we impart knowledge, skills and confidence if people do not feel responsible for their financial circumstances.

1. A Responsible Definition
2. Rights, Wrongs and Money
3. Governments, Leadership, Dreams and Privilege
4. The Real Financial Literacy Value Proposition
5. Notes and References

Rights, Wrongs and Money

I have been involved in teaching and supporting financial literacy for a few decades. The greatest challenge are not the concepts but personal perceptions. Most people think they are above average money managers. Instant gratification and consumption have accelerated this.

About fifty years ago, many families wrestled with the morality of getting a credit card. Acquiring something that you did not pay for (yet) was repugnant. A half century later, acquiring something is seen as a right rather than a moral conundrum.

Governments, Leadership, Dreams and Privilege

Our governments have not helped. A balanced budget, let alone paying down debt, is the exception for western economies. If our political leaders care not a whit about the financial burdens we are placing on our unborn grandchildren, is it such a crime to buy a $5 coffee with the remaining limit on your credit card?

Economics and social changes have evolved as well over the past half-century creating a larger divide between the wealthiest and poorest citizens. This divide has grown due to a wide variety of causes. For example, technology concentrates wealth. The Gilded Age in the 1890’s saw this with railroads and manufacturing; today’s Robber Barons build electric cars, ship products to our doors or live in former communist countries.

This gulf between what an average family can earn in a lifetime as compared to how much the super wealthy can earn in a day has grown. Add to this how fast the wealth can evaporated in a financial crisis makes it difficult to preach the merits of financial prudence.

The Real Financial Literacy Value Proposition

Nevertheless, I believe that people want to and can be responsible for their actions, including financial ones. While we cannot control many of the above forces, as individuals we do control our individual decisions. Perhaps the most compelling reason to become more financially adept is to buck the above trends. Rather than being swept along with events we don’t control, understand and take advantage of them for the benefits of ourselves and families.

The most compelling reason to get someone to take financial literacy training maybe because it is exactly what everyone else is NOT doing.

Notes and References

1. Canada, Task Force on Financial Literacy, Canada, and Department of Finance. Canadians and Their Money: Building a Brighter Financial Future : Report of Recommendations on Financial Literacy. Ottawa, Ont.: Dept. of Finance Canada, 2010. https://www.deslibris.ca/ID/227084.