Effect of Financial Literacy on Management of Personal Finances Among Employees of

Commercial Banks in Borama, District Somaliland

Financial Literacy

Financial literacy is defined as ones‟ knowledge of facts, concepts, principles, and technological

tools that are fundamental to being smart about money (Garman & Gappinger, 2008). While

several widely used definitions of financial literacy exist, all of them generally imply the ability

of individuals to obtain, understand and evaluate information required to make decisions to

secure their financial future as best as possible. According to the (OECD, 2011) financial literacy

is a combination of awareness, knowledge, skill, attitude and behavior necessary to make sound

financial decisions and ultimately achieve individual financial wellbeing.

Management of Personal Finances

Personal finance refers to as all financial decisions and activities that a person could make and

undertake. This could include budgeting household incomes and expenditures, savings,

investments, mortgages, insurance and all other decisions that require money. The most

important factor of personal finance management is financial planning, which should involve

analyzing the financial position and setting of short-term and long-term goals. Approaches to

financial management relates to impulsiveness during spending, using credit instead of cash and

general spending patterns that result in using more money than is available.