What is Financial Literacy?

As defined by Wikipedia (http://en.wikipedia.org/wiki/Financial_literacy) – Financial literacy is the ability to understand finance. Raising interest in personal finance is now a focus of state-run programs in countries including^[1] Australia, Japan, the United States and the UK. The Organization for Economic Co-operation and Development (OECD) started an inter-governmental project in 2003 with the objective of providing ways to improve financial education and literacy standards through the development of common financial literacy principles. In March 2008, the OECD launched the International Gateway for Financial Education, which serves as a clearinghouse for financial education programs, information and research worldwide. In the UK, the alternative term “financial capability” is normally used: the Financial Services Authority (FSA) in the UK started a national strategy on financial capability in 2003. The US Government also established its Financial Literacy and Education Commission in 2003.

This is a very important initiative to me and is a cornerstone of my passion in life.  I think that there is a large gap between what the average American knows about personal financial issues, and what is expected of each individual on a day-to-day basis.  I’m not talking about complex finance items such as derivatives, CDOs, swaps, or any other detailed finance-related items that you’ll hear about on CNBC, I’m talking about the basic and intermediate knowledge that a person should know to make his or her day-to-day personal finance decisions.  I’m talking about items that this website covers, such as: buying a car, banking and interest rates, buying and selling a home, credit and debt, insurance, money management (saving, budgeting, and spending), retirement, college, taxes, and your career.

Knowledge is power.  Lack of knowledge leads to poor decision-making (note: the economic crisis that the economy is in right now primarily relates to home mortgages and leverage).  Let’s work together to promote financial literacy throughout the nation!

MF