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Paper on Principles of Financial Literacy

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Added on  2019-09-19

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This report is on "financial literacy initiatives". In this present paper, we will discuss the principles of financial literacy. Financial literacy is defined as the ability to understand the working of money in the world. It includes managing the income of an individual in order to generate higher returns within a particular period of time. The aim of the financial education principle is to improve the knowledge related to the financial products, risk, concept, information, and objective advice in order to improve the decision making of an individual which enables to enhance the financial wellbeing of people.

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Principles of Financial Literacy
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Table of ContentsIntroduction......................................................................................................................................2Principles of financial literacy.........................................................................................................21.Budgeting & financial planning...............................................................................................62.Key Differences........................................................................................................................83.Risk management.....................................................................................................................94.Importance of considering superannuation............................................................................105.Importance of power if attorney and valid will......................................................................11Financial literacy initiatives & its impact......................................................................................12Conclusion.....................................................................................................................................13References......................................................................................................................................15
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IntroductionIn this present paper, we will discuss the principles of financial literacy. The financial literacy is defined as the ability to understand the working of money in the world. It includes the managing of income of an individual in order to generate higher returns within the particular period of time. It also comprised the skills and knowledge of an individual who helps to take an effective decision regarding the utilization of financial resources. The short-term programs are focusing onraising interest in personal finance in various countries such as Japan, United States, Australia and the United Kingdom.In the United Kingdom, it is recognized as the financial capability and the government has started national strategy on financial capability in the year 2003 (Fernandes et al., 2014). The government of the United States had also taken the initiative by established financial literacy andeducation commission in the year 2003. According to the analysis of financial literacy by the international OECD study, it is found that there were only 67% of respondents have an understanding of compounded interest, but out of them, only 28 people are having a good understanding of compound interest (Jappelli et al., 2013). In the Canadian survey, it is considered by the respondents that the right investment prediction is more difficult than selectingthe dentist. In the survey of United States, it is found that the four out of ten people are not saving for their retirement.Principles of financial literacyIn the recent years, the concerned regarding the financial literacy have been improved across the worldwide in order to enhance the financial knowledge of people. It has stemmed in the specific
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from public to private support system through shifting the demographic files which comprise of aging of population and development in the wide range in the financial market. The concern was highlighted mainly due to the financial and economic challenges which recognize the lack of financial literacy and it contributes towards the ill financial decision making of people (Lusardi et al., 2014). Following are the seven principles of financial literacy which are developed by the organization for economic cooperation and development in order to improve the financial literacy across the worldwide:1.Financial educationThe aim of the financial education principle is to improve the knowledge related to the financial products, risk, concept, information and objective advice in order to improve thedecision making of an individual which enables to enhance the financial wellbeing of people. The financial education is beyond the provision of financial advice and information which should be regulated in order to improve the decision making of an individual and protect the financials of clients. 2.Financial capacity buildingAnother principle of financial literacy is to build the financial capacity through the financial information and instruction which should be promoted in order to achieve the objective of principles. The financial education should be providing in an unbiased manner and fair in order to improve the knowledge of people. The various programs should be coordinated in order to develop the efficiency among the people. 3.Financial education program
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