FINANCIAL LITERACY

Module I: Introduction
Meaning, importance and scope of financial literacy:
 Financial literacy helps individuals know how to best manage their money in terms of their life goals and
their economic and financial situation. It should enable everyone to make informed financial decisions.
Financial literacy is all the more essential in a digital world that gives the customer a considerable amount of
autonomy. Indeed, the digitisation of banks has given individuals more opportunities in terms of account
monitoring, payments, financing and even investments, but these are not risk-free.
 The OECD (Organisation for Economic Co-operation and Development) Council of June 2012 defined financial literacy as a
“combination of financial awareness, knowledge, skills, attitude and behaviours necessary to make sound
financial decisions and ultimately achieve financial well-being”

 As one can imagine, the scope of financial literacy is vast. It encompasses budgetary education (personal or
family budget) and learning about banking tools (everyday banking, savings, insurance), as well as
understanding economic concepts (how the economy operates and is financed) and public policies.

 Financial literacy is now among the growing concerns of the authorities at both national and international
level. With the G20 advocating for it as one of eight core competencies, it is considered essential to
protecting and improving one’s financial well-being.

 Several studies have shown that better financial literacy from an early age could be beneficial, especially in
terms of debt prevention. The Allianz study [5] shows that people with a good understanding of financial
concepts and risks are twice as likely to make better financial decisions and manage their money better
than those without this knowledge. Similarly, the level of financial literacy positively influences
households’ financial behaviour, particularly the ability to plan a long-term budget.

 The benefits of financial literacy are numerous. At a national level, a good level of financial literacy helps to
improve financial stability and contributes to the growth of the country’s economy. As Christian Noyer
(former Governor of the Bank of France) points out, “the French people’s level of financial literacy has a
strong influence on their consumption and, indeed, on the development of the country”. In this sense,
financial literacy is a factor in economic efficiency and social equity.