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Understanding Consumer Financial Education

In this section, we define financial literacy, and outline the objectives of the National Consumer Financial Education Strategy.  

 

What is consumer financial education?

The process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being. - OECD 

What is financial literacy?

People’s ability to understand finance thereby allowing them to make informed and effective decisions through their understanding of finances. It encompasses participation by people in economic life that maximises life opportunities and enables them to lead fulfilling lives

Why Financial Literacy is So Important

Financial literacy is crucial to help ensure consumers save enough to provide adequate income in retirement while avoiding high levels of debt that might result in bankruptcy and foreclosures. A few years ago, a study from financial services company TIAA-CREF showed that those with high financial literacy plan for retirement and in essence have double the wealth of people who do not plan for retirement. Conversely, those with low financial literacy borrow more, have less wealth and end up paying unnecessary fees for financial products.

Read more: Why Financial Literacy is So Important | Investopedia http://www.investopedia.com/articles/investing/100615/why-financial-literacy-and-education-so-important.asp#ixzz4t1Kywp9w 

What core competencies should consumers have?

Defining what competencies consumers should have to achieve strategic objectives of the national consumer financial education strategy. 

Key Definitions

Definitions of consumer financial education, financial literacy, financial capability, and the financial sector code. 

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