Throughout a person’s lifetime, they are confronted with the burden of making financial decisions, particularly when starting their adult lives. Unfortunately, however, may people lack the requisite knowledge and information when making these important financial decisions. Beyond the individual level, the role financial literacy plays in creating sustainable development has been widely acknowledged.
As a matter of fact, the idea of harmonising development goals with the needs of future generations has been extended to include the critical element of financial management. In this article, I will discuss the importance of financial literacy in the context of creating sustainable development.
Defining financial literacy
Now let us look at some definitions of financial literacy. Financial literacy, the cornerstone of informed financial decision-making, embodies the capacity to understand and use an array of financial skills. These skills encompass budgeting, savings and investment strategies, insurance, and an understanding of financial instruments. More than just a skills set, financial literacy signifies a relationship with money, underpinned by an ongoing journey of learning and growth.
At its core, financial literacy requires a comprehensive grasp of fundamental principles and concepts from the time value of money to compound interest, debt management, and prudent financial planning. It empowers individuals to navigate the complex terrain of financial markets and make informed choices, particularly as deregulation and enhanced access to credit reshape the financial landscape.
Sustainability literacy
With the heightened interest around sustainable development, another crucial thread emerges – sustainability literacy. This multi-faceted concept, as defined by the United Nations, embodies the fusion of knowledge, skills and perspectives that propel individuals toward a fervent commitment to shaping a sustainable future. It fosters the ability to make informed decisions in pursuit of this noble goal. Sustainability literacy transcends individual understanding, delving into the intricate interplay between humanity, natural resources, the environment and development. It beckons communities to rally around collective actions, collaboration and multi-disciplinary endeavours. Concepts – such as social justice, community engagement and behavioural shifts – underscore the profound significance of sustainability literacy in shaping a harmonious future.
The relationship between financial literacy and socio-economic development
The mutual relationship between financial literacy and socio-economic development is an undeniable truth. We have already shown how financial literacy delivers an array of benefits, which include elevated individuals’ quality of life, enhancing financial stability – leading ultimately to social and economic advancement of the person, community or a nation state. This relationship is developed through multiple channels.
First of all, heightened financial literacy engenders more efficient allocation of savings and amplified returns, attracting increased investments and propelling economic growth. Secondly, a financially literate populace is more likely to engage in stock and financial markets, stimulating market activity. Lastly, financial literacy nurtures market confidence, ensuring heightened consumer awareness and robust policy environments conducive to growth. In nations like Ghana, where daily choices ripple through the economy’s fabric, the unbanked sector’s untapped potential becomes evident. Elevating financial literacy within this segment possesses transformative power, contributing to widespread benefits and nurturing a thriving economy.
In summary, financial literacy empowers individuals to make sound financial choices which improves their personal financial well-being. These choices include responsible debt management, prudent investment strategies, and the pursuit of diverse financial products and services. This starts a chain reaction, increasing the usage of financial products and services; therefore, financial institutions become innovative in their product offering, economic indicators improve, jobs are created which present a wider tax net, and more pension funds which can become available for investments.
The confluence of financial and sustainability literacy
As an individual paves the path to financial freedom through financial literacy, a parallel journey unfolds on the road to sustainability. Sustainability literacy is pivotal in understanding and pursuing a sustainable future. Its acquisition empowers individuals to critically assess societal norms and envision an environmentally conscious track and lifestyle. In essence, a financially literate person is more likely to be sustainability literate; a combined force that ensures socio-economic development on a sustainable basis.
Financial literacy serves as a fulcrum that facilitates prudent economic decisions that endure the test of time. Financial choices, rooted in financial literacy, reverberate through societal systems, and underpins long term prosperity. The trajectory of nations’ economic and financial growth can be traced to the degree of financial literacy nurtured within their citizenry. In the symphony of societal evolution, change harmonises with continuity, and transformation dances with tradition. Anchored in this dynamic interplay, financial literacy and sustainability literacy emerge as guiding stars. Financial literacy, an art of informed financial decision-making, intertwines with sustainability literacy, fostering a profound commitment to shaping a harmonious future.
As individuals grasp the reins of financial empowerment and societal well-being, a thriving, sustainable society emerges. Stanbic Bank Ghana’s resolute efforts to nurture financial literacy bear testament to the potential harboured within collective action. Just as a single thread weaves into a majestic tapestry, financial literacy and sustainability literacy intertwine to craft a future where prosperity is not only attainable but sustainable.
Francis is the Head ESG & Sustainability – Stanbic Bank Ghana
