A new study highlights the importance of financial literacy in enhancing an individual’s sense of financial security. This feeling of security is not necessarily tied to income level, but rather to one’s ability to manage finances effectively, demonstrating the need for financial education.
The Global Financial Wellness Advisory Board conducted the study using US-based participants who identified being debt-free, having savings, and owning a home as the key indicators of financial security. The need for individualized financial education was emphasized, underscoring the importance of resources to make financial learning more accessible.
In a related survey, 70% of the 498 American participants confessed to feeling stress related to personal finances. High levels of debt, lack of savings, and unexpected expenses were the main causes of this stress.
Enhancing financial security through literacy
This financial stress also seemed to connect to physical health issues, creating a cycle of financial concerns leading to deteriorating health and then increased financial worry due to medical costs.
While certain difficulties, such as economic volatility and loss of income, were beyond individual control, 23% of respondents identified mismanaged finances as a main issue. The study suggests that strategic budgeting, debt consolidation, and lifestyle changes can alleviate such financial distress.
In response, the National Financial Literacy Month will focus on sharing strategies to manage, optimize, and safeguard financial resources. The information aims to better equip individuals with the necessary skills to make effective financial decisions, including budgeting, investing, and planning for retirement.
Annamaria Lusardi, the founder and academic director of the Global Financial Literacy Excellence Center (GFLEC), emphasizes the importance of financial education, likening it to swimming. She argues that financial literacy, like swimming, becomes more relevant in challenging situations, and urges all individuals to prioritize financial education for improved economic resilience.
