Financial literacy the key

Three years back, the Financial Times (FT), one of the world's leading business news organisations, launched a campaign for higher financial education standards by setting up a charity body. The FT Financial Literacy and Inclusion Campaign (FLIC) focused on improving financial literacy in the United Kingdom (UK) and other parts of the world. What instigates a daily newspaper older than 135 years to go for such an initiative, especially when London, the capital of the UK, is one of the oldest and most prestigious global financial centres? It is the necessity to 'improve public understanding of money' and 'to educate and lobby for policy improvements.'
In an open letter to the readers on September 3, 2021, the FT editor Roula Khalaf said that FT launched the 'new charity to promote financial literacy and inclusion around the world.' She also urged the readers to join hands and donate according to their ability to make the effort successful. She also mentioned that the data on financial literacy is shocking. "According to the World Bank, two-thirds of the global population are not financially literate and the correlation between financial illiteracy and deprivation is plain," she continued. "Despite unprecedented fiscal relief measures, the fallout of the Coronavirus pandemic has forced millions in the developed and developing worlds into financial insecurity. Financial resilience has never been more important."
Simultaneously in a piece titled 'How a new FT campaign will provide financial knowledge to those who need it most', Aimée Allam, the executive director of FT FLIC, said that the campaign wanted 'to improve financial literacy education where the need is most acute.'
"Amid growing inequalities exacerbated by austerity and the pandemic, the public is increasingly aware of the need for financial resilience." She added. "Our aim is to provide the financial knowledge which can protect and empower those who need it most... Our initial focus will be on the UK, though we aim to expand globally."
The initiative has received a good response. For instance, a coalition of businesses has urged the UK prime minister to make financial education compulsory in all English schools. Entrepreneurs, donors and family foundations are backing various such moves in the United States (US) to teach the basics of managing money.
It is to be noted that financial literacy is the ability to understand a variety of important financial concepts and effectively use various financial skills. In other words, financial literacy is the cognitive understanding of financial components, concepts, and skills such as budgeting, investing, borrowing, savings, and managing money. A financially literate person is able to make better financial decisions and manage money and debt effectively. A lack of financial literacy may be quite damaging to an individual's long-term financial resources.
Promoting financial literacy is not a new thing, however. Over the decades, various governments, central banks, financial institutions, non-profit entities, academic bodies, and international organisations have been trying to educate the masses about financial literacy. These institutions have devised some tools to promote and spread financial literacy so that people can understand the basic things of finance.
Money is one of the most essential things for any person to live and survive. Without knowing how to manage money, he or she will be in trouble. Financial literacy helps them overcome the gap. From opening a bank account to investing in the stock market, financial literacy is needed.
As the financial market has become more diverse and complex now than it was even a decade ago, it becomes more challenging to understand the products and movements of the market. There are commodities and foreign exchanges besides bonds, debentures, commercial papers, equities, mutual funds, derivatives, futures, options, and swaps. Again, debit and credit cards, other banking products like various deposit schemes and loan products, insurance products, and pension funds are expanding. Without having some elementary knowledge, it is difficult for any person to make the right decision about purchasing or investing in any product or instrument.
In Bangladesh, many people have lost their money by investing in the share market. The market debacles in 1996 and 2011 are two big examples of a lack of financial literacy. Many people rush to invest in the stock market without considering the pros and cons, as almost all of them are financially illiterate. They were provoked by manipulators and expected to make a big gain without a minimum understanding of the nature of the stock market. Still, many investors and traders do not care about developing their financial literacy. Rather, they rely on speculation and rumour.
The proliferation of virtual platforms for various financial products also makes the situation more challenging. Lack of preliminary knowledge about the financial market puts many into trouble, as they join the virtual platform only to make some money. Instead, many of them fall into the trap of illegal gambling in the virtual world.
Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC) have long introduced the financial literacy programme to educate people who want to invest in various financial products. Different banks and financial institutions also have programmes to develop financial knowledge among their clients. Nevertheless, the country still lags in financial literacy, although it is not difficult to grow. One needs some concentration along with a minimum effort to understand the thing.
As Bangladesh's economy has been expanding, new types of business and financial products are also coming into the market. Consumers are also looking for diversified products and services. Thus, financial literacy is much needed now so that people can make reasonable and prudent decisions about their income, expenditures, and investments.
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