Documente Academic
Documente Profesional
Documente Cultură
Financial literacy
and the life cycle
The understanding of financial needs leads to an understanding that there
exists a structure of reasoning and explanations, which is both necessary
and sufficient to understand the crux of the issues regarding financial
literacy at various stages of life.
T
he US Financial Literacy and health, it is infeasible to educate all the knowledge can be generalized for all
Education Commission defines consumers about how to take care of all financial decisions.
financial literacy as “the ability their medical needs. Rather, the general Consider first the example of saving
to make informed judgments and to take education regarding health is mostly in for retirement. Here, the consideration
effective actions regarding the current and the lines of educating about activities and begins by observing that the primary
future use and management of money.” behavior, such as good diet and exercise, objective in this decision is to save so
Financial literacy should include the which generally promote good health that the standard of living established by
ability to understand financial choices, and well-being. Further, people seek the individual prior to retirement can be
plan for the future, spend wisely and expert medical help when they observe maintained through the retirement years.
manage and be ready for life events such symptoms of problems in themselves. The pinpoint accuracy of the explanation
as job loss or saving for retirement. At Similarly, the intent of financial education is important because it serves as a way to
the heart of the definition of financial should concentrate on financial activities avoid complications with other potentially
literacy is the term “informed,” as and behavior that promote general related decisions, leading to less-informed
emphasized previously. It is the effective financial well-being and health. Along the decisions.
use of information in the decision making same lines, the general education should While most consumers understand
that retirement implies the cessation of
IN CONSIDERING THE ENTIRE PROCESS OF work-related income, they may often fail
EDUCATION, a very useful analogy can be to appreciate that the retirement years
made between the financial health and well-being coincide with the gradual loss of an ability
of a person and their medical health and well- to make up for shortfalls in retirement
being. Regarding medical health, it is infeasible to funds with advancing age. It is this
knowledge that can truly spur the decision
educate all consumers about how to take care of
to save. In an equivalent sense, the
all their medical needs. consumer needs to understand that the
process that separates the more literate also provide consumers with the ability to cost of not having sufficient funds during
from the less literate decision. This paper detect symptoms of poor financial health retirement when the funds are most needed
will focus on what constitutes information so that they can seek a financial expert. can result in reductions in living standards
as defined, what are the benefits of Thus, financial literacy must begin by that are more painful at an advanced age.
being informed, the costs of not being explaining the need and importance of The clarity is also important to separate
adequately informed, and the dynamics of good financial decisions. other decisions that are often included in
information over time. Individuals make a wide array of this decision.
As with any other decision, a financial financial decisions through their lifetime. For example, consumers budgeting
decision arises from some need. The study Examples of such decisions include saving for retirement savings may include the
of the nature and characteristics of various for retirement, managing credit wisely, contributions made in funding children’s
financial needs serves as the starting point budgeting, tax and estate planning, college education. Consumers need to
in financial education. As will be seen in insurance etc. Each of these decisions is understand that this is a separate
the rest of the paper, the understanding of prompted by the emergence of a need. To investment and savings decision and
financial needs leads to an understanding help consumers make informed decisions, should be approached separately.
that there exists a structure of reasoning the process of education should begin by Otherwise, the simultaneous solution of
and explanations, which is both necessary a very clear explanation of the need and attempting to meet two different financial
and sufficient to understand the crux of why the decision to correctly satisfy the objectives will typically lead to sub-
the issues regarding financial literacy at need is so important. This explanation optimal decisions and transactions in
various stages of life. should also be accompanied by the costs unsuitable products. This latter example
In considering the entire process of of an ill-informed decision. exposes the role of clarity in defining
education, a very useful analogy can be In the rest of the paper, three examples financial objectives. In turn, it is this
made between the financial health and of financial decisions will be continually clarity that leads to the proper “informed”
well-being of a person and their medical used to elaborate on the content and decisions.
health and well-being. Regarding medical process of literacy. The reader is urged As a second example, consider the