Pilar Guerrero, an MPP student and Chevening scholar, has a background in financial inclusion and education. In celebration of Global Money Week (17-23 March 2025), Pilar explores the importance of financial education as a public policy tool and its potential to empower individuals worldwide.
What comes to mind when you hear the term ‘financial education’? Many people have two common misconceptions: that it requires higher education and strong mathematical skills, and that it is only useful to those with a large amount of money to manage.
These assumptions, however, are not necessarily true. While a basic understanding of mathematics can assist in grasping certain financial concepts, complex mathematical nous isn’t essential. Even those who haven’t completed school can develop strong financial management skills. For example, a small entrepreneur can acquire the skills to build a profitable business, while educated individuals with master’s degrees can find themselves in significant debt.
Moreover, financial education is actually most valuable when resources are limited. It empowers individuals to manage their money wisely and work toward saving goals, proving that financial literacy is not just for the wealthy.
Financial education can be taught to anyone - whether children, adults, small entrepreneurs, or those looking to save for retirement. Financial literacy is a skill that benefits everyone, regardless of age or background.
Understanding financial education
Financial education, as defined by the Organisation for Economic Co-operation and Development, involves equipping individuals with the knowledge and skills necessary to make informed and responsible financial decisions. The outcome of this education is financial literacy, which is the ability to understand and apply financial concepts effectively, allowing them to make informed decisions about their resources.
Recognised globally as a core life skill, financial literacy is essential for empowering individuals and supporting both personal and societal financial well-being.
However, there is no single ‘right’ or ‘best’ decision when it comes to finances. Each person’s unique financial circumstances, goals, and preferences shape their approach to financial well-being.
Current challenges in financial literacy worldwide
The International Survey of Adult Financial Literacy reveals that only 34% of adults meet the minimum benchmark for financial literacy. When it comes to financial behaviour, 70% of adults report carefully considering affordability before making purchases. However, only 26% compare financial products across different providers, and just 24% seek independent advice when purchasing financial products and services. These gaps highlight significant challenges in financial education. Additionally, emerging trends such as digital financial services and new investment options add further complexity, emphasising the need to strengthen financial education efforts worldwide.
Why is financial education important?
The Organisation for Economic Co-operation and Development has issued recommendations to promote financial education across various target groups, through national strategies and initiatives led by both the public and private sectors. These initiatives focus on empowering individuals to make informed decisions about savings, credit, insurance, retirement and pensions. Financial education is crucial at every stage of life.
A financially educated population not only contributes to a better-functioning economy, by saving to mitigate the impact of economic shocks and managing debt, but also enhances the effectiveness of public policies.
Consider any social program: effective resource management is key. For instance, if a policy aims to promote the technical development of a product, entrepreneurs will need to learn how to access credit to fund their innovations and manage their income to continue investing in the next stage of growth. In another example, policies aimed at protecting women from violence can empower them through achieving economic autonomy. Financial education is vital in this case, teaching women how to budget with limited resources, and even how to start and manage their own businesses, can provide them with additional freedoms.
Governments worldwide should prioritise financial education, ensuring that citizens are equipped with the necessary knowledge and skills to manage their resources and money effectively.
What is the Global Money Week?
Global Money Week is an annual global campaign designed to ensure that young people are financially aware from an early age, gradually acquiring the knowledge, skills, attitudes and behaviors needed to manage their finances effectively.
This year, Global Money Week will be celebrated from 17-23 March, with the theme ‘Think before you follow, wise money tomorrow’. The week is an opportunity to assess the progress made in financial education in our countries, to improve current strategies, or to explore new proposals to make a tangible impact on people’s lives.
In an increasingly complex and interconnected world, the importance of financial education cannot be overstated. Financial literacy is the key that unlocks opportunities and empowers individuals to make choices that shape their futures.