Financial Literacy Programs

Definitions

Financial literacy is the most common of a variety of terms (e.g., financial capability, economic literacy) used to refer to consumer financial acumen. Attempts to define financial literacy presume adequate reading literacy and mathematical proficiency, but extend beyond these basics to include access to the knowledge, skills, or resources necessary to make effective financial decisions. The explicit goal of improving consumer financial literacy is to change financial behaviors. All economically developed nations define the desired financial behaviors with little concern for subjective consumer desires. Substantial differences exist, however, between the United States and other economically developed nations regarding the means by which the desired financial behaviors are pursued.

In the United States, financial literacy means knowledge and skills for individual economic maximization. Areas of concern include budgeting, savings, investing, asset accumulation, spending, credit/debt management, avoidance of predatory financial products, consumer and investor rights, and participation in mainstream financial institutions. The financially literate decision is the decision in each of these areas that produces the maximum return at the minimal costs to the individual decision maker. The underlying assumption is consistent with classic free market capitalism in which individual self-interest produces collective benefits.

Other economically developed nations place their emphasis on the national economy rather than the individual. Areas of concern expand beyond the individual profit motive to include a variety of national interests as diverse as increasing social inclusion, decreasing social deprivation, reducing overall consumer debt, increasing household savings, or improving the efficiency of government-sponsored social welfare programs. The means of achieving the goal of financial literacy is not the education of the individual but rather increased access to informational resources. Thus, the financially literate decision is that which conforms to national goals rather than that which serves the individual consumer.

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