The Importance Of Financial Education, And Financial Literacy

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Saving has been promoted as good practice to guard against immediate and future financial crisis and risks (Clancy, Grinstein-Weiss, & Schreiner, 2001; Curley, Ssewamala, and Han, 2010). Saving provides economic security and in the long run helps individuals to accumulate wealth and assets (Clancy et al, 2001). However, for low-income households and individuals, saving becomes extremely hard given that they face economic hardships and survive barely on minimum income and lack of resources (Clancy et al (2001). Such households are faced with a number of challenges which range from individual to institutional barriers which affect their saving outcomes and behaviors. Sherraden (2013) highlighted that, households and individuals in general still …show more content…
Literature Review
a. Financial education
Financial education, financial literacy, and financial inclusion are concepts that are often applied together and sometimes interchangeably. Although I will focus much on financial education and literacy, all concepts needed for an individual to be financially capable. Literacy is an outcome of education hence financial literacy may be an outcome of financial education (Hastings, Madrian, & Skimmyhorn, 2012).
Financial education has been defined as the “the process of building knowledge, skills, and attitudes” in order to become financially literate (Cohen and Nelson, 2011, p 6). The purpose of financial education is to provide people with financial information to stimulate behavioral change. Financial education in its broadest sense is about making information available to people about financial options, financial products and services, so that in the process people’s behaviors and attitudes are influenced towards effective use of financial resources which are scarce (Cohen & Nelson,
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The theory suggests that for people to be considered financially capable, they must possess the capabilities (knowledge and skills) and the opportunity to act i.e. access to institutions. In defining the building blocks of financial capability, Sherraden (2013), emphasize that financial literacy is the first block of financial capability. In this framework financial literacy empowers people with knowledge and skills which, make them better managers of their own finances and also help them make informed financial decisions, which improves people’s financial behavior. Using the asset and financial capability theoretical frameworks the study will test two

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