Definition of Financial Literacy Extends Far Beyond Individual Skills

Nonprofit organizations often seek philanthropic causes to sponsor, and in today’s economy raising people’s financial capabilities has gained popularity as a charitable venture. But what is financial literacy? According to the NFEC, a leading provider of money management education, products, and services, the definition of financial literacy can be stated succinctly as follows: “possessing the skills and knowledge on financial matters to confidently take effective action that best fulfills an individual’s personal, family and global community goals.”

Note that this definition emphasizes that financial literacy has impact far beyond just the individuals who acquire the skills. The reference to “global community goals” indicates the far-reaching nature of personal finance education—as well as its inverse, financial illiteracy. So why is financial literacy important? Because when people become capable to handle their money wisely, prepare for the future, and recognize and seize opportunities that arise, that capacity benefits the national economy and, inevitably, the whole world.

Other government agencies and financial literacy coalitions define financial literacy in various ways. However, the NFEC is unique in recognizing the global impact raising the financial competencies of the world’s citizens can have. This part of the definition is vital because it illustrates how financial literacy can make the entire world a better place.

Any organization or individual with an interest in promoting financial literacy should start by determining “what is financial literacy” for them. Everyone lacks skills in some areas while being strong in others. Gaining an understanding of all the aspects of a good financial education builds a solid foundation for creating a successful campaign or initiative. It starts with that individual definition.

For answers to all your financial literacy questions and how your organization can become involved to make a real difference, visit the NFEC web pages at https://www.financialeducatorscouncil.org.