Financial Education

By: EconomyWatch   Date: 30 June 2010

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Financial education is important not only for investors, but for every person managing his/her daily finances. The knowledge of finance helps people improve their financial health. Financial education teaches people the concepts of time, money and risk management and helps them balance their budget in an efficient way. With complex lending and saving options offered by financial institutions, an investor would require some knowledge to choose those that suit him/her the best. Individuals need finance education to insure their future (selecting appropriate insurance policies, investments and retirement plans).

The lack of financial literacy is seen by some as a contributing factor to the global Financial Crisis of 2008. Financial education should be focused on simplifying the perception of household finance, investing and insurance, so that people can take informed financial decisions.

Benefits of Financial Education

Risk management forms a crucial part of financial education and involves the evaluation of the risks associated with a financial asset and its profit potential. Financial education also helps one identify the factors that can prevent the easy flow of cash. Moreover, financial education can help people:

  • Save adequately for their retirement.
  • Avoid high debt liabilities that may lead to bankruptcy.
  • Select the right savings or investment options that meet their requirements.
  • Safeguard themselves against fraud.
  • Develop products, with assistance from financial service providers, to meet their financial goals.

Sources of Basic Financial Education

Individuals can opt for online financial courses for basic financial education. These courses focus on the concepts of personal finance management, financial choices, profit opportunities and financial risk management. They can also read up on various informative websites about savings, investment, credit, insurance and retirement planning. One can hire financial advisors, such as brokers or agents, for suggestions.

It has been observed in developed economies that most young people have little inclination to save and invest judiciously, while most of the elderly have to bear a dramatic hit on their lifestyles post retirement. This highlights the need for financial education. The US Department of the Treasury established the Office of Financial Education in 2002 with the aim of promoting access to financial education tools. The Office of Financial Education helps US citizens make informed choices in several areas of their personal finance, while laying emphasis on saving, credit management, home ownership and retirement planning. Similar government initiatives are being taken across the globe and can be a helpful resource for financial education.

It's good to know that there are schools that offer Financial Aid to students who excel in their studies.


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