The Importance of Financial Education: How it will help to create a Nation of Business Owners

by Lewis Humphries on Friday 17 January 2014, 10:36 PM | Category: Project Management| View: 1350 views

In the quest to become a financially independent and responsible adult, you are never truly finished learning.

This is the theory, however, which understands that financial literacy is the key to long term success and a prosperous economy. Despite this, however, recent studies have suggested that there is a patent lack of financial literacy and awareness in Northern America, both in adults and the current generation of children who are emerging into an increasingly volatile economic climate. While two-thirds of students scored less than 70% during the 2012-2013 National Financial Educators Council financial literacy test, for example, just 39% of adult respondents answered a minimum four out of five multiple-choice questions correctly.

Given that these questions related to topics including interest calculations, mortgage repayments and financial investments, it is clear that the majority of adults currently lack the fundamental skills to seek out financial independence. Not only is this a global issue that has also impacted on developed economies throughout the world, but it may even prevent future generations of adults from achieving their personal and professional goals. If the parents of today are unable to educate their children and help them to develop core financial skills, we may be left with a scenario where there is a distinct lack of business leaders and economic innovators.

The Impact of Financial Illiteracy on the Economy

The link between financial illiteracy and a lack of economic opportunity is not hard to identify. Fundamental fiscal skills such as budgeting and calculating interest repayments are crucial to the creation of a profitable business, as the amount that you spend on delivering a specific service or product has a direct influence on your bottom line earnings. In fact, it can argued that this is the single most important factor when it comes to developing a successful business, as an inability to manage costs will cause you to inflate price points and ultimately drive customers away.

With this in mind, the a lack of financial literacy could have a significant impact on future economies. In essence, it would prevent innovative individuals with an entrepreneurial spirit from establishing a successful businesses, which in turn would reduce the number of jobs created within the private sector. Over time, this could trigger a significant rise in the national unemployment rate, leaving individuals with poor financial skills struggling to survive on minimal income.

Addressing the Balance: Creating a Financially Literate Society

Despite recent efforts to promote financial education and literacy at high school level in the U.S., there is a growing sense that the initial results are falling short of expectations. Increasingly, it is becoming apparent that private and government backed educational schemes should be aimed at younger students, starting with the fundamental aspects of financial planning before leading into a more complicated program. This type of structured, long-term program of learning would help to better prepare youngsters for life as a responsible adult, and ensure that they had the skills to buy a home, manage mortgage repayments and start a business venture.

The retention rate on financial lessons is also considerably shorter, meaning that individuals would need constant refreshers as they progress through childhood and into early adulthood. The key to successful financial education therefore lies in collaboration between public and private bodies, who can work together to deliver tailored learning package to young children, high school students and adults. To understand the benefits of the latter in particular and how they work, check out the Ratesupermarket scholarship contest here.

The Last Word in Financial Education

Patience is also a critical virtue in the quest to eradicate financial literacy, as it will take time for educational bodies to evolve and create a truly effective program of learning. They must therefore be given enough scope and opportunity to ensure that citizens have regular access to personal finance educational tools, which can gradually challenge their beliefs and change behavioural habits over time. With this in mind, it may not be until the next generation comes of age that we can truly judge the impact of existing educational measures and programs.

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