finance essay sample

finance essay sample

The Importance of Financial Education

1. Introduction

Topics such as the importance and the acquisition of financial education have garnered increasing attention in the Brazilian press, especially due to the inclusion of this knowledge as a compulsory educational content at the elementary school level. This interest has not been limited to practitioners and academics in education but also reaches stakeholders, such as banks and other financial service providers who directly influence the shape and content of educational projects in schools. Nevertheless, there is evidence to show that, regardless of the extent and correspondences of the various agencies involved, the impacts deriving from these educational interventions are not being observed. Using program evaluation methods, the present study investigates the impacts of school-based financial education intervention on the level of financial literacy of 4th and 5th-grade students in Brazilian elementary schools. Results suggest, however, that the Brazilian Financial Education Program, introduced through the Ministry of Education, although being structured in a sensible way for students, does not lead to a significant positive impact on the performance of these students.

High levels of financial illiteracy place individuals in a vulnerable position throughout their lives. Expensive financial products, low savings rates, and high borrowing rates tend to increase the number of negative financial choices that people make. People with a minimum level of financial education can be partly protected from these bad choices. At the aggregate level, this minimizes the risk of having large sectors of the population who are unable to meet their needs during economic downturns, strengthening the pillars of a stable society. The close relationship between economic stability and financial education underscores the need for programs designed to improve literacy among adults and youth, aiming to help individuals avoid the tragic consequences of bad decisions regarding both the allocation of their resources and multiple aspects of their lifelong wellness.

2. Benefits of Financial Education

Financial education modernizes the consumer landscape with tools that already indicate comparable advantages such as creating optimism and intuition, maintaining premium relationships, and daring to be better connected with people, information, and institutions. Such familiar modern tools come from the digital age. Financial education provides a way to enter the digital age and induce each digital movement, either by a small soldier or by an airbus maneuver. The engine of financial education fuels the human being, while the digital car runs and defies energy. Finishing fuel basket that belongs to everyone. Reviewing his money basket is the catalyst. Become a hero of your fuel. You hold the basket with the key, and only you may recognize your individual accomplishment.

Increases financial stability. Knowing how to better manage, sleep, save, invest, and protect your finances, your future and your present are the best shields against economic doom and gloom that can really arise around with ease and then fade into not much more than as fast as an 80s dinner date.

Improves the economy. Speaking of cycles, the economy thrives on cycles of spending and saving. On the bank, businesses, and governments. Traditional and non-traditional audiences. Having a more financially knowledgeable public can help avoid the mistakes made by a less financially knowledgeable population, such as over-speculating real estate, opaque practices, small trucks, failure to invest, parking emergencies, and generally creating economic upheavals.

All of us, free of our generations, have made financial mistakes. By knowing and understanding the why and how of our own money history, we can move forward and make better financial decisions. Making better financial decisions provides a platform for not only what you might term “somewhat okay-ish” financial health and stability, but also an opportunity to break the cycle of financial mistakes that are passed through the generations.

Financial education promotes your well-being. Knowing and managing your money helps you make better financial decisions, improves the economy, and increases financial stability. That’s a pretty big pile of benefits.

3. Challenges in Financial Education

There are challenges to be faced so that this financial education program is effective. The first point is with regard to the legal support: in Brazil, a specific discipline for teaching issues related to economy and business is required. Although, when focusing on the topic, it points to the absence of discipline in the formation of some professionals who are users of the guidelines, as well as low financial literacy of a large part of the basic education teacher workforce, especially in relation to the personal financial education issue. Another relevant challenge to the consolidation of the subject in the school curriculum is the tradition in the role attributed to this level of basic education. The professionals responsible for teaching in this modality tend to have a more “mathematical” bias, according to the prescribed knowledge, in which it is practically absent on the subject.

Financial education is an important tool for people looking to plan their future. An important goal of it is to provide conditions so that people are prepared to face financial decisions in the most appropriate manner, reflecting on their financial life and being able to define actions that will result in personal and family well-being. The effectiveness of a broad program in financial education deserves recognition from all social segments in relation to the embedding of rational consumer behaviors, which may ultimately represent benefits for the population and for the country. In this respect, qualified professionals, families, and institutions would act directly in reducing the low levels in the financial educational hierarchy.

4. Strategies for Improving Financial Education

There are many ways of being ‘financial literate’, and hence there are many different indicators for financial literacy and tools to measure them. According to the NOPLAMES methodology, conceptualization requires a focus on field indicators, general indicating groups in order to be addressed consistently. In particular, the methodology indicates that general indicators (described in the literature) may be addressed by specific indicators used in interviews, surveys and measurement. Obviously, this does not imply that they constitute a full spectrum of the complexity of financial literacy. The factors and other specifics of the country’s needs should be removed, and empirical evidence is required for validation in local conditions. In the NOPLAMES methodology, the authors observe most of the relevant outcomes shown in the field good practice analyzing the Norwegian National Strategy for Financial Literacy and the OECD countries (especially New Zealand and Germany). These recommendations are under development in the national context.

There is a growing consensus nowadays that economic, financial, and social education can play a significant role in equipping individuals (publicly and privately) with the financial knowledge and skills to make responsible decisions and take effective action. Despite this, there are still important barriers that must be overcome if every person is to be given the financial tools to handle their day-to-day money management and to achieve their personal financial goals. To step forward, public authorities, educators, and other stakeholders have set up policy initiatives and strategies aimed at increasing financial literacy among the population. Although these initiatives present some key basic features, they have the potential to develop in different ways, resulting in national policies that, while having identical goals, take on different forms. The primary factor that influenced and will continuously influence different national strategies is the historical and socio-economic differences between the countries. Within this scenario, a comparative analysis of various experiences provides evidence of good practice and allows the identification of potential overlapping strategies supporting specific initiatives. The current chapter examined the main policy initiatives undertaken by different national and international organizations from which the authors extracted data to produce a framework of the financial literacy and education strategies. This evidence shows how national initiatives may be associated with public policies to encourage development in reflective and specific actions.

5. Conclusion

It is crucial to act now to equip individuals properly for the financial demands and challenges they face during the young, middle, and later years of their lives. “Preventative” financial education and certified training programs not only benefit the individuals concerned as well as the economy, but also raise the image and reputation of financial practice locally, regionally, and internationally. Safe and advanced financial professionals who benefit from good reputations based on the provision of sound and professional financial advice inspire more consumer confidence at all ages, from the young to the elderly community, and will consequently build a stronger and more sustainable financial and social environment that will stand the test of time and economic conditions.

The importance of financial education – indeed, the consequences of a lack of effective action to improve the levels of financial capability – are felt around the world. In more than 30 countries, financial literacy surveys demonstrate that levels of financial capability are worryingly low. These surveys suggest that many individuals lack the knowledge, understanding, skills, and confidence to make reliable and informed decisions when managing money, and that this often leads to poor financial well-being. These findings cannot be ignored, especially when – as the global economic downturn has painfully revealed on both national and personal levels – the ability to manage money wisely has never been more important.

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