Financial Capability Definition
The NFEC defines financial capability as:
“Possessing the knowledge on financial matters to confidently take effective action that best fulfills an individual’s personal, family and global community goals.”
Other Organizations Definition of Financial Capability
The Center for Financial Inclusion’s states, “Financial capability is the combination of attitude, knowledge, skills, and self-efficacy needed to make and exercise money management decisions that best fit the circumstances of one’s life, within an enabling environment that includes, but is not limited to, access to appropriate financial services.”
Education Scotland point out that “Building financial capability often involves the development of the literacy and numeracy skills which underpin everyday financial activities, such as reading and understanding written and numerical information and filling in forms. Many of the individuals and groups for whom improved financial capability can have a significant impact may also be those in need of literacy and numeracy support.”
Oxford Scholarship Online states “The concept of financial capability bridges the disciplines of economics, psychology, and sociology, taking into account how individual action and behavior, human psychology, and social structure influence household financial management and decision making.”
The NFEC’s definition of financial capability is the same as our financial literacy definition. The difference in the two is that financial capability puts more focus on measure long-term change in behavior. For instance, a student graduates from a financial literacy course that focuses on saving money. The instructor would follow-up six months later to measure the change in the students savings rate.
The NFEC has always been focused on this ‘change of behavior’ and feel it is the essential measurement to judge a programs effectiveness. Even though the new buzz word for financial literacy is ‘financial capability’, the NFEC remains committed to helping people mold or modify their financial behaviors to align with their personal goals.