Financial Literacy
Financial literacy refers to the knowledge about the financial aspects of one life. It is not limited to the awareness of banking services available in your area. Rather it covers the way you make your budget, are you aware of the advantages of saving or not, where to save and why?, from where to take loan?, What financial institutions and products are available in your area, etc. Thus, financial literacy is about having skills and knowledge that help to make informed and effective financial decisions.
Financial literacy refers to the knowledge about the financial aspects of one life. It is not limited to the awareness of banking services available in your area. Rather it covers the way you make your budget, are you aware of the advantages of saving or not, where to save and why?, from where to take loan?, What financial institutions and products are available in your area, etc. Thus, financial literacy is about having skills and knowledge that help to make informed and effective financial decisions.
According to OECD, "Financial literacy is a combination of awareness, knowledge, skills, behavior and attitude necessary to make sound financial decisions."
Components of Financial Literacy
1. Budget :
It refers to the skills for prioritization of necessities and economic allocation of resources.
2. Savings :
It refers to the knowledge about the benefits of savings, where and how to save safely and profitably.
3. Loan Management :
It refers to the knowledge about the advantages and disadvantages of taking loans, proper utilization of loans. It requires a knowledge about where to take loan from and how to take.
4. Investment :
4. Investment :
It refers to the knowledge of analyzing the profitable sources of investment and investing in the best ones.
5. Risk Management :
It requires the knowledge of minimizing the risk through insurance and other measures.
6. Types of Financial Institutions, Services Provided by Them and Use of Technology :
This is perhaps the most important component of financial literacy. It demand knowledge about the financial institutions available and the services provided by them and the use of technology in handling the financial transactions .
Financial Literacy in the World
-Only 33 percent adults are financially literate.
-35 percent of men and 30 percent of women are financially literate.
-Most of the financially illiterate adults live in developing and underdeveloped countries.
-In the chart below, the darker regions imply more percentage of financially literate adults.
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| Source : http://gflec.org/initiatives/sp-global-finlit-survey/ |
-Country wise, financial literacy ranges from 13 percent to 71 percent.
-In Nepal, 18 percent of the adults are financially literate.
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| Source : http://gflec.org/initiatives/sp-global-finlit-survey/ |
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