Financial Literacy

Running head: FINANCIAL LITERACY1
Financial Literacy: Literature Review
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Financial Literacy: Literature Review
1. Introduction
Today, financial literacy might be one most important aspect of modern life. Managing money reflects, if anything, an ability to make sound financial decisions. The reality is, however, most people do not have enough financial literacy to manage money well. The United States is a clear case in point. Having received young formal or informal guidance on financial matters, many American youth are not ready to make sound financial decisions and choices and, as a result, have accumulated an average student debt rising from $18,550 (in 2004) to $28,950 (in 2014) (“Facts About Youth Financial Knowledge & Capability,” n.d.). This financial illiteracy is, in fact, rampant and cuts across many consumer, professional and student segments. In a study investigating financial literacy among university students in eight European countries ( Estonia, Germany, Italy, Netherlands, Poland, Romania, Russian Federation and Turkey), Ergün (2017) shows that a combination of student major (business), university degree (PhD), household income (high), peer financial advice, and former participation in a financial course contribute to more financial literacy. Despite all efforts to define and set up programs for financial literacy and expanding financial education, such as The Financial Literacy and Education Commission (FLEC)'s financial literacy education website (“MyMoney.Gov: Expanding Financial Education and Access,” n.d.) growing complexity of modern economy has made a general, acceptable definition of financial literacy unfeasible possible
Background on Financial Literacy
The growing overlap between consumer behavior, economic complexity and product/service diversity has made financial literacy a much less straightforward concept and
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practice. In contrast to a few decades ago, consumers were used to clearly defined products and services provided at slightly unchanging prices and, if changing, were predictable. Moreover, products and services in any given area of economic activity were offered by known producers and service providers all physical and present for consumers to select from and, if unsatisfied, to switch from. Today, products and services originate thousands of miles away, add up costs on a long shipping journey and, once received, are for consumer’s own judgment to keep, offer a feedback on or return. The complexity of modern day service economy has, put more specifically, made financial literacy more problematic. The financial knowledge once suitable for clearly defined products and services provided in certain markets at predictable prices is no longer applicable to current state of affairs. Unsurprisingly, financial literacy has come to be an issue of growing concern not only for general consumer public at large, as has been for so long, yet for a wide range of stakeholders. Indeed, financial literacy has evolved such as to raise calls to introduce new innovative methods of instruction at business schools...