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Financial literacy: Why it matters the most

17 May 2020 at 21:53hrs | Views
Imagine not ever having to worry about money or that bills being due ever again. It is most people's dream but one that few people ever achieve. Financial literacy is understanding money and being able to use it for your own economic gain. Achieving financial literacy is not all about getting a "certification" in a field of finance for example Financial planning advising or banking and finance, it is also about equipping people with the right knowledge, skills, attitude and behaviors they need to manage their finances effectively and it goes beyond managing personal finances and savings to being fluent in global economics, entrepreneurship and investing.

The world of research has identified financial literacy as a global problem, the lack of financial literacy is blind to gender, socio economic status and age; a survey conducted by the Institute for Financial Literacy in Zimbabwe (IFLZ) discovered that in every 10 formerly employed Zimbabweans 8 do not have investments, savings or multiple income streams such that if "life happens "so to say they would have to borrow money to cover for the unexpected expense. The same research further indicated that in every 10 employed Zimbabweans 8 did not know how much their banks are charging for simple transactions. In every 10 youths aged 18 to 35, only 3 of them had started a retirement fund and /or found value in taking financial literacy classes while some felt they did not qualify for favorable bank terms. Zimbabwe being made up of mostly the informal sector means consumers are shouldering more financial decisions rather than relying on Pension funds from companies and government.

Amidst such alarming levels of financial illiteracy, the world around us is changing having being hit by a global pandemic that most of us were not prepared for, jobs and businesses have been threatened and people are now compelled to live within their investments, savings and emergency funds but what investment does an average citizen have given their financial background and how no deliberate action had been taken to systematically teach them financial literacy? Many have had to get themselves into debt to survive this lockdown period, and life as we know it may not go back to what is was before.

Now the million-dollar question is how do we plan for the financial future? How do we emphasize the importance of financial literacy in an environment which does not even have a problem with financial illiteracy? How do we design programs that will keep people engaged and motivated to become financially literate? But wait, the answer is in front of us; there are several ways to improve the financial well-being of our people. Firstly, society has to be willing to change its views about money, spending habits and savings as well as understands how the world around us is changing and how we use money is constantly evolving. Technology has allowed us to purchase almost anything with a click of a button from fast food deliveries ,to clothes , to online services and "free" trials and subscriptions, making it harder to keep track of money and easier to overspend .The answer to financial literacy isn't earning more money but rather being able to manage what you have at present .Most people tend to think that when they have more money it will be easier to track their expenses but this has turned out to be untrue. There is need for all policy actors to prioritize teaching financial literacy in communities, the business environment and in the school system. Policy makers need to protect consumers and continuously improve their financial inclusion initiatives so as to provide useful and affordable financial products and just as much institutions need to provide suitable products across the board to complement government efforts.

Institutions such as the Bankers Association of Zimbabwe (BAZ), The Securities and Exchange Commission (SEC) and IOM Zimbabwe have already done some work in the area of financial literacy to improve the livelihood of people in communities having hosted some workshops to teach programs to teach on the subject but more needs to be done. It would be beneficial for the education system to add financial literacy to its curriculum from a young age all the way to tertiary education.

How financial literacy is taught is also another area of concern, passing along information is a building block but does not change behavior, awareness alone is a step in the right direction but the systematic learning of financial literacy can definitely change society's approach to financial welfare. Organizations outside of government should invest in the financial well-being of their employees as well, the government should spirit financial literacy campaigns through mass media forums like radio and television. In the era of FinTech; interactive platforms and applications, online classes and games can be set in place to target different age groups, gender, and different income constituencies. Understanding concepts such as Interest rates can have bearing on borrowing and spending.  Non-Profit organizations can also play a major role in teaching financial literacy and getting communities engaged.  Families need to play their role in teaching their children saving from a young age, young adults and parents alike need to understand that it's never too early to start saving for a college fund or budgeting for that exciting gadget they want for Christmas or even a new car.

Effective education enables people to make more effective decisions around their finances, to feel confident in doing their due diligence when starting a business or finding an institution or financial planner they can trust, put their goals into perspective and help them to achieve their financial goals. Technology has evolved and allows people to make their own decisions on different types of investments .Higher levels of financial literacy means being better prepared to handle uncertainty, improving the lifestyles of  all citizens and reducing poverty as well as promoting economic growth. Starting early also ensures discipline in people when it comes to matters of money.

 Nobuhle Lynda Zondo
| Financial Coach | Business Strategist | FX Trader |
"Wealth is the ability to fully experience life". Henry David Thoreau
My passion as a Finance Mentor is to provide value to my audience while changing the way they view money, it is to give them the confidence they need in finding the right investments and income streams to help build the platform they need to create wealth for themselves and generations to come.

Source - Nobuhle Zondo
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