LOW PUBLIC AWARENESS OF THE FINANSIAL LITERACY

Qurrota A’yunin – University of Muhammadiyah Yogyakarta

I. INTRODUCTION

The ability to manage personal finances is becoming increasingly important in today's world.
People should plan long-term investments for their retirement and the education of their children.
They also have to decide on savings and short-term loans for vacations, down payments on houses,
car loans, basic goods, consumption, and other expensive items. In addition, they must manage their
own health and life insurance needs.

Most people feel that money will guarantee happiness and the amount of income is also very
influential on welfare. Whereas a person's welfare does not lie in how much income is generated
each month but how we manage that income as effectively and efficiently as possible so that all
needs can be met. In fact, no matter how big the income we get, if we are not good at processing it,
we will still feel poor. But unfortunately not many people understand and understand this.
Therefore, it is very important that someone has the ability to manage their personal finances to be
economically secure through financial literacy. The financial literacy index is still very low in
Indonesia. The low index has made the government through the Financial Services Authority (OJK)
make a strategy in the National Strategy for Indonesian Financial Literacy or SNLKI (Revised 2017).
This strategy is expected to increase public awareness of financial literacy. Because financial literacy
is needed in the future. The author says that our lack of knowledge of financial literacy will have a
bad impact on us in the future.

Financial literacy even in developed countries with well-developed financial markets. On

average, about one-third of the global population is familiar with the basic concepts that determine
day-to-day financial decisions (Lusardi and Mitchell, 2011c). Finance is often a problem for many
people, almost all of us are familiar with the general world of finance such as spending more so that
personal savings are running low, personal debt or even some of us have been trapped by scammer
investment offers. The Ministry of Finance (2020) states that the financial problems faced by people
with minimal knowledge can lead to poverty. The 2019 OJK survey also shows that the financial
literacy index in urban areas is only 41.41% while rural communities are only at 34.53%. According to
the 2019 National Financial Literacy and Inclusion Survey, the financial literacy index reached 38.03%
and the financial inclusion index 76.19% and this figure has increased from a survey conducted by
OJK in 2016 namely the financial literacy index 29.7% and the financial inclusion index. 67.8%
(Source: ojk.go.id).

This study has three purposes. First, to find out why financial literacy is very important in life.
Second, to analyze and find out people's understanding of financial literacy. This analysis can help us
to determine the low level of financial literacy in the community. The third purpose is to make the
public aware of the impact of a lack of awareness of the importance of financial literacy and to
examine how a community's knowledge influences his/her opinions and decisions on personal
financial issues.

specifically, we were interested in the following three questions that guided our research.

1. What is financial literacy and what makes financial literacy important?

2. Why is financial literacy still low in society?

3. How to increase the financial literacy index in the community?

II. LITERATURE REVIEW

The Presidential Advisory Council on Financial Literacy (PACFL, 2008), convened to “increase
financial literacy among all Americans,” defines financial literacy and educational finance as follows:
Financial literacy: the ability to use knowledge and skills to manage finances resources effectively for
lifelong financial well-being. Financial education: the process by which people increase their
understanding of financial products, services, and concepts, so that they are empowered to create
informed choices, avoid pitfalls, know where to turn for help and take other actions to improve their
current and long-term financial well-being.

According to the Moore (2003), financial literacy is “Individuals are considered financially literate
if they are competent and can demonstrate that they have used the knowledge they have learned.
Financial literacy cannot be measured directly so a proxy must be used. literacy is acquired through
practical experience and active integration of knowledge. As people become more literate they
become more financially sophisticated and it is thought that this may also mean that an individual
may be more competent” (p.29).

Previous research studies were mostly carried out by practices in the financial services industry.
Where they focus more on money management and investment related issues. This emphasis is
consistent with the findings of Certified Financial Planners, who suggest that financial literacy is an
important area of personal financial planning (NEFE, 1993-1996).

Financial knowledge is very important in life as a useful tool for making financial decisions,
but research in various countries still shows that people's financial knowledge is relatively low
(Orton, 2007). Based on the results of the 2011 Bank Indonesia Household Account Survey, only
43.75% of household use of savings accounts, and only 19.58%, is the short amount of household
debt in the bank. This fact is caused by the lack of awareness of financial literacy as well as the lack
of knowledge and understanding of personal finance needed by individuals who understand it to
make the right decisions in finance, so it is absolutely necessary for everyone to optimally use
financial instruments and the right products. Lack of knowledge about financial literacy is a serious
problem and a big challenge for people in Indonesia. Financial education is a long process that spurs
individuals to have financial plans in the future in order to get prosperity according to the pattern
and lifestyle they live (Mendari and Kewal, 2013).

III. RESEARCH METHOD

This research used a survey questionnaire designed for the people who live around me. This
survey was conducted online with data collected to know how many people understand and what
they understand about financial literacy. In this study, the target population is mostly high school
friends and neighbors in East Kalimantan. In total, about 20 participants, 15 high school friends and 5
neighbors were invited to participate in this study. Of the 100 percent, only about 20% of
participants know about financial literacy, 15% have heard of financial literacy and the other 65% do
not know or even have heard of financial literacy.

This questionnaire was conducted online using google from which I made myself according to
the data requirements that I needed. Responses were using multiple choice agree and disagree and
yes or no.

Sending a survey link to participants in a WhatsApp group or personal chat