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The Importance of Financial Literacy

Posted on Friday, July 27th, 2018 at 1:14 pm

 

The basics of financial literacy refer to a general understanding of how money works, measured through a skillset that allows a person to make effective choices while maximizing their financial resources. But just as common sense is not that common, neither is financial literacy.

The Journal of Consumer Affairs states that fewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification. According to Mansha Financial’s 2017-18 Impact report, 63.1% of Canadian students said the effectiveness of personal finance education in school ranked very poorly.

In a world where the financial environment is already increasingly demanding, young adults have the burden of carrying copious amounts of student loans and credit card debt. This means a lack of knowledge in the field can lead to financial mistakes early on in their lives, which is detrimental to their financial health and can inhibit their ability to earn money and build savings. Unfortunately, a study by the FINRA Foundation estimated that nearly two-thirds of Americans couldn’t pass a basic financial literacy test and have difficulty applying financial decision-making skills to real-life situations.

In most cases, students in high school are not required to take a personal finance or economics class. More often than not, it’s up to parents to impart their wisdom to their children regarding basic concepts like savings, loans, and investing; sometimes that’s limited to having a piggy bank and a weekly allowance as a child. It’s essential for parents to have an open and ongoing conversation about finances with their children as they grow, such as involving them in planning the financial aspect of a family vacation or using everyday examples like a utility bill to explain ideas like budgeting and the importance of avoiding debt.

What children, youth, and young adults need are communities to help bridge the gap in financial knowledge that the school system largely fails to provide. Mansha Financial is a Toronto-based insurance agency that works to provide workshops and scholarship programs that provide students and young adults with financial information, so that they can become well-equipped to make sound fiscal decisions on their own. Through free workshops such as “We are Here,” which feature financial advisors and legal professionals, students are able to learn how recognized professionals overcame their struggles to reach the peak of their career and financial success. “Yes She Can” is another Mansha Financial workshop, which celebrates strong women leaders from various fields, including authors and VPs of large organizations, who share their knowledge and experience in what it takes to shatter the glass ceiling.

On August 1, Mansha Financial will host the Tav Malhotra Celebrity Invitational, an event aimed at filling the gap in financial education in the school system. The annual celebrity golf invitational raises funds to provide youth financial literacy programs across the Greater Toronto Area, namely I Can We Can Inc. and Victim Services Toronto. The event will feature NBA Stars, Jamal Murray and Khem Birch, media personalities Tyrone Edwards and Cabbie Richards, Michael Wekerle, and Mayors Bonnie Crombie and Rob Burton. Media interviews will take place from 7-8am at Glen Abbey Golf Course in Oakville, followed by red carpet benefit media interviews from 8-9pm at The Ritz Carlton in Toronto.

As Einstein famously said, “Those who understand interest earn it; those who don’t, pay it.” There is still much progress to be made in the way of implementing practical finance-related courses in high schools. However, with growing resources to help improve financial knowledge, and a rising interest in money matters among young adults, educators and the general public are beginning to recognize the importance of financial literacy.

 

Helen Jacob | Staff Writer

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