What is the best definition of financial literacy? Although each financial literacy definition is varied, most have similar components. Each of the financial literacy definitions listed refer to the importance of having the skill sets and knowledge to make informed decisions.
The National Financial Educators Councils financial literacy definition also adds in a psychological component. The NFECs’ advisory board, comprised of financial professionals and seasoned educators, feel this is a critical component. The NFEC states “A lot of people know what they should do; however a good majority freeze up when it comes time to make a financial decision. Most have the knowledge but lack the confidence to make the right decision and take action in a decisive manner. Since money is directly tied to peoples emotional state we feel including this component in our financial literacy definition is critical.”
Another unique portion of the NFECs’ definition is that it includes reference to a larger impact than just ones on personal financial situation. “Global community goals” were referred to and this correlates with the NFECs’ financial education standards that include social enterprise.
Most of the financial literacy definitions we examined either directly or indirectly refer to a state of changing economic environment. The Jump$tart financial education definition goes into detail by stating “Financial literacy is not an absolute state… Financial literacy refers to an evolving state of competency.”
The National Financial Educators Council provides financial education resources, promotes advocacy campaigns, and helps organizations build sustainable financial education programs. As thought leaders they produced the Framework for Teaching Personal Finance though a partnership with Danielson Group consultants to meet the specific needs of Financial Education Instructors and the National Financial Capability Strategy, which serves as a blueprint for organizations building financial education programming. Their national team of educators lead financial literacy classes and a variety of programming to promote financial wellness around the globe.