Financial literacy — Crucial or an after thought
We have all heard the phrase that ‘Money is the root of all evil’ and more recently the antidote phrase ‘Lack of money is the root of all evil’.
So, which exactly is the right one? Or more specifically, is there even a right phrase that can sum up all that we know about money or lack thereof.
Financial literacy is something that is never brought too mainstream in most societies. There is a tendency in many cultures to actively discourage any talks of finances, as though its a bad thing.
Sadly, this is the case for most developed nations too. Most of the population in developed countries earn sufficient money to be classed well above the poverty threshold. Yet, a great majority of the population struggle with their finances.
Average credit card debt per household in UK stands at roughly £2,600 in 2020 with the average rate of interest charged being in excess of 20%. This is for a country where the average salary is over £31,000 per annum, being higher than most countries in the world.
The debt level shows that most people do not have sufficient savings even with the higher than usual income and have to dip into credit card debt with high interest rates to finance some of their purchases.
This is the same country where people are spending over £300m over this weekend in London’s West End alone, as the country emerges from the national lockdown restrictions.
If people have all this money, then what’s wrong with them spending in a weekend?
It’s not necessarily true that most people who are going out of their way to spend this money actually have this in their pocket to begin with. Why do you think that the credit card debt is mounting up?
Many of those who are splurging this money are doing so using credit card debt. Sure, there will be some who were able to save up during lockdown restrictions as there were not many avenues to spend their money. This gives them a chance to loosen up the knot on their savings.
But there will be many more who did not have any savings to begin with, but didn’t want to miss out on the fun weekend and made full use of their credit cards, getting themselves even deeper into debt.
The UK’s economy is cantered around consumerism and flourishes on excessive spending. This kind of compulsive spending is great as it turbo charges the economy, but is it any good for the consumer?
Consumerism is so ingrained in the ecosystem that you will be the odd one out if you do not participate in what society thinks of as an obligation.
This is the tough question that most people shy away from. We are never taught about financial management, even in Universities that supposedly have modules on financial management.
Sure, we are taught about statement of profit and loss, balance sheet, cash flow statement and much more. But all this is taught in light of big corporates and no attention is brought towards managing the individuals finances.
This can be seen in young grads behaviour towards finances, as they are usually the ones with high paying jobs and even higher spending habits.
This begins a never ending cycle of better accessories, bigger car and nicer house. Effectively becoming a slave of their own lifestyle.
Conclusion
In light of the compulsive need to spend everything a person earns and more more, it would be wise to move financial literacy from just an after thought to a crucial element of modern day life!
