The Impact of Achieving Financial Literacy

In today’s generation, individual encounters different challenges when it comes to

finances. Be it as a student, professionals or self-employed individuals. Challenges like shortage
of money, financial problems, budgeting, and addressing expenses. In regards with this matter, it
greatly affects the society and the community where students, professionals and self-employed
individuals lack basic knowledge and skills and the ability to deal with money which results to
poor financial decisions. The lack of financial sophistication is a widely pointed reason for many
financial mistakes made by individuals (Mak & Braspenning, 2012). Knowing the value of
money plays a vital role in improving finances and achieving financial literacy will bring a great
impact not only to themselves but also for their long-term plans in life.

To further improve finances, distinguishing different financial behaviors and problems

among students, professionals and self-employed individuals is a must. In here, an individual
could track on where he/she experiences shortcoming when it comes to finances. In the study of
Bauer, Braun & Olson (2000), showed that several studies in the past have tried to investigate the
impact of financial literacy on financial behavior. Financial literacy has proved to facilitate
student’s involvement in savings, investment, freeing themselves from debt, effective money
management through living on a budget. Different financial behaviors and problems among
students, professionals and self-employed individuals include: Reckless spending on money, no
saving habits, no tracking of expenses, no visualization of long-term plans in life and more.
Knapp (1991) suggests that increasing financial literacy can be effective strategy in improving
quality of life which ultimately leads to better decision making resulting with effective utilization
of resources to improve their standard of living.

There are three factors affecting financial behaviors and problem among individuals
namely: age, employment/education, family background and knowledge about financial literacy.
These factors greatly affect the financial decision of individuals which may lead them to
financially challenged. In addition to that, when it comes to employment and education, the
expenses rise. For instance, if a person is employed basically, he/she have the money to spend on
something. The tendency of having money can lead to spending too much with the fact that
having money to spend. Unfortunately, then that person will be having a bad decision making in
terms of how to spend his/her money. As we go in education, same thing will happen if a person
is being taught and practiced how to use and spend money efficiently, then most likely that
person knows how to handle money. Like for example, spending money on just important things
and weighing things equally.

Lastly, in terms of family background, it contributes a lot in shaping a person’s behavior

and attitude. It is in the family where all teachings and values are being practiced. If a certain
family doesn’t teach their children in handling finances, therefore, they will experience
challenges in handling finances. Lastly, having knowledge about financial literacy will make an
individual financially literate. Thi et al. (2015) states that financial knowledge has a positive
relationship to financial management behavior due to the role of education with the existence of
seminars that more and more about financial knowledge will improve one's insight into financial
management behavior. However, besides the external influences of politic, demographic and
economic forces, Robb & Woodyar (2011) point out that the individuals’ financial well-being is
dependent on their actions.

Previous studies highlight benefits of having financial literacy. According to Knapp

(1991), increasing financial literacy is a way to increase empowerment and improve the quality
of life. Energy, thought, and time are spent pursuing money and limiting the unnecessary waste
of money. Thus, when students gain more knowledge and more positive attitudes toward money,
he/she make better decision, which save resources and improve his/her situation (Knapp, 1991)

Achieving financial literacy among students, professionals and self-employed individuals

will have a great impact in making financial decisions. It mitigates the effects of an individuals’
financial challenges at home, school, workplace and around the society. Achieving financial
literacy is a lifelong process that's what it makes it essential for an individual to apply learnings
about it as it is going to mold them on how to be efficient with their finances. Also, it is the best
vehicle in accomplishing more goals, equipping the knowledge and skills in performing effective
financial decisions, becoming a successful and better individual and reaching financial stability
in life. Furthermore, Hibbert & Beutler (2001) added to this argument that lack of financial
knowledge has often leads to face financial difficulties in individuals’ lives. Achieving financial
literacy is not just an asset to yourself, but a big investment to reach and improve quality of life.

References

C.A, Robb and Woodyar A., “Financial knowledge and best practice behavior” Journal of
Financial Counseling and Planning, vol. 22, no. 1, pp. 60-70. 2011

J.P Knapp, “The benefits of consumer education: A survey report” Michigan Consumer
Eduaction, 1991.

J.R Hibbert and I.F Beutler, “The effects of financial behaviors on the quality of family life:
Evidence from adolescent perceptions”, 2001.

J.W. Bauer, B. Braun and P.D Olson, “Welfare to Well-being Framework for Research,
Education and outreach”, The journal of consumer affairs, 2000.

Knapp, J. P. (1991). ​The benefits of consumer education: A survey report [​ Brochure].

Michigan Consumer Education Center.

S.J Huston, “Measuring financial literacy” 2010

Thi, N., Mien, N., and Thao, T.P. . “Factors Affecting Personal Financial Management
Behaviors: Evidence from Vietnam Economic, Finance and Social Sciences” 2015.

V. Mak and J. Braspenning, “Errare humanum est: Financial literacy in European consumer
credit law” Journal of consumer policy, vol. 35. Pp. 307-332. 2012