It Is Common To Define Literacy Primarily From A Reading-Centric Viewpoint: Research Method Assignment, UCD, Ireland

The purpose of this summary is to provide supporting information for the research conducted on financial literacy.

It is common to define literacy primarily from a reading-centric viewpoint. The term has a broader meaning involving “the ability for written texts to be understood, valued, used, and incorporated into consciousness to enable people to participate in society, to realize the aims of the society, and to develop their awareness and potential” (OECD 2016).

The Corporate Finance institute defines financial literacy as “the cognitive understanding of financial components and skills such as budgeting, investing, borrowing, taxation, and personal financial management.”(Financial Literacy, 2021)Therefore an individual who does not have sufficient knowledge to incorporate the skills or participate in real-world financial-related activities for example understanding the banking system is considered ‘financially illiterate’.

As per the definition of literacy by the OECD mentioned above the possession and use of that knowledge must be mainly in the interests of the individual and secondly in the interests of society. The ownership and conscious application of that specific knowledge is significant to the viability and progression of economies and is significant to the individual reaching their goals more effectively. Furthermore, a person who can identify and understand the basic financial system and the key areas of the finance industry is also able to encode and decode this information according to the standards of their profession, culture, education level, and socio-economic standings and apply this to become more financially motivated and further broaden their expertise and knowledge.

Financial Literacy is key to improving skills, on the spectrum of better health care, family planning, education, reduction of poverty for the active citizen. Regardless of material goods and the socio-economic standing of an individual, financial literacy expands the possibilities of the individual, creates possibilities for the sake of their interests, while further developing them.

In 1995, the CEO of Ford Motor Credit Corporation, William Odem, created the Jumpstart Coalition for Personal Financial Literacy. This first introduced the concept of “financial literacy” and provided advocacy, skills, and research to advance financial literacy in school-aged children. It is this ideology and real-world tangible learning that should be adopted worldwide to benefit the economies and individuals.

Leaders of the OECD’s research program emphasized that“beyond financial knowledge and behavior, attitudes towards financial products, services, processes, conditions, and concepts are the important areas of financial literacy.” (Atkinson and Messy, 2012). If a person has a negative attitude towards these aspects along with negative attitudes towards financial institutions or is not knowledgeable in financial matters they will most likely not engage in these manners, leading them to either resent the industry and not progress the economy or allow the institutions control over their finances and not ‘break the circle’ for the next generation.

It is an area that has huge potential to be developed, as evidence-based on research conducted by the OECD in 2017, on 14 countries in 4 continents across various socio-economic ranges, showed the attitudes of those entering the financial markets, were collated with those who had a standard level of financial literacy. While they did find strong evidence that many participants who were considered both financially literate and illiterate rejected the financial approach of “Carpe Diem” and overall favored the idea of long-term financial planning. (Zsoter,Nemeth, Luksander, 2017). It was on the application of this knowledge into tangible financial planning where the similarities stopped. They found that those considered financially illiterate did not plan for long-term financial wellbeing.

It is the ownness of governments and education providers to develop conscious financial education and training at a school-going age to lower the level of financial illiteracy. For example, just this past month the state of Ohio made personal finance education a mandatory requirement for all high school students. If this was adapted worldwide then the benefit would be changed attitudes towards financial institutions leading to better learning practices, more trust in government policies, lower global debt, and better individual financial management.