Meaning and Importance of Financial Education

Financial education is being proved to be increasingly important. Not just for investor but it is also becoming essential for the average family trying to decide how to balance its budget, buy a home, fund the children’s education and ensure an income when the parents retire and other finances related decisions.

Of course people have always been responsible for managing their own finances on a day to day basis. These expenses include spending on a holiday or save money for new furniture. How much to put aside for a child’s education or to set those up in life. But recent developments have made financial education and awareness increasingly important for financial well-being.

For one thing, the growing sophistication of financial markets means consumers are not just choosing between interest rates on two different bank loans or savings plans, but are rather being offered a variety of complex financial instruments for borrowing and saving, with a large range of options.

At the same time, the responsibility and risk for financial decisions that will have a major impact on an individual’s future life, notably pensions are being shifted increasingly to workers and away from government and employers. As life expectancy is increasing, the pension question is particularly important as individuals will be enjoying longer periods of retirement.

Individuals will not be able to choose the right savings or investments for themselves, and may be at risk of fraud, if they are not financially literate. But if individuals do become financially educated, they will be more likely to save and to challenge financial service providers to develop products that truly respond to their needs, and that should have positive effects on both investment levels and economic growth.

Thus, financial education is becoming increasingly important for every person at any status or age group.