Financial literacy – Fundamentals, examples, concept

What is financial literacy?

Financial literacy – skills and knowledge that help a person achieve prosperity. This ability to manage money so as not to borrow and guarantee security.

The essence of financial literacy is a good understanding of these issues:

• How money is earned and spent.
• What are active and passive income or expenses.
• What is a loan and how to use it.
• How money loses value (inflation) and increases (investment).
• How to plan a budget and prioritize costs.
• How to set financial goals and save money for the future.

Why financial literacy is needed

man thinks and looks out the window

It is important for man and the state. When people avoid debt and plan spending, their situation improves. They experience less stress, eat better, relax, and are less likely to get sick. As a result, conditions for the realization of personal potential appear. This is a characteristic feature for developed countries..

Examples of financial literacy

man in financial consultation


• No savings and does not plan to start them.
• Does not set financial goals and does not make a plan.
• Borrowing money without thinking about interest and repayment strategies.
• Spends all the funds that he receives.
• Does not invest, does not try to maintain or increase capital.
• Keeps money “under the pillow”, and not in the bank or investment assets.
• Does not restructure loans.
• Does not use insurance.


• Has financial goals with a different horizon (from car repair to pension savings).
• Controls the amount of debts.
• Adjusts financial plan.
• Uses loans as a tool to increase revenue, and not as a means of fulfilling whims.
• Prioritizes – gets rid of debts with high interest, and then saves.
• Keeps money in investment instruments (deposits, stocks, bonds, ETFs, mutual funds).
• Restructuring loans to get rid of excess costs.
• Insures property and health – unexpected spending undermines the financial environment more than constant small contributions.

Financial literacy in Russia

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The last major study of financial literacy among Russians took place in 2016. We examined 30 countries with an average literacy score of 13.7. Russia got 12.2 out of 21. This is the 25th place..

In 2015, a similar study was conducted by Standard. & Poor’s. The survey data of more than 150 thousand people from 140 countries formed the basis. The questions dealt with four topics: inflation, interest rates, risk diversification and compound interest. Any person who answered correctly in at least one of the directions was recognized as competent.

According to the results of the study, Russia fell to 24th place with Serbia, Belarus, the UAE, Madagascar, Kenya, Togo. The result is 38% financially literate. It is curious that Ukraine, Kazakhstan, Zambia, Senegal (all at 40% each), Turkmenistan, Zimbabwe and Mongolia (41% each) were higher in the ranking. The average financial literacy in the world was 38%, and in developed countries – 55%.

In 2019, they conducted a study of financial literacy in the G20 countries. Russia scored 12.7 points out of 21 and took 9th place.

What are they doing in Russia to increase the financial literacy of the population

the man on the subject explains to colleagues

We are engaged in the formation of financial literacy by the Central Bank, the Ministry of Finance and the Ministry of Education. In 2017, an agreement was concluded on the introduction of the principles of financial literacy in educational standards..

The State Duma has been discussing the inclusion of the subject “Fundamentals of Business” in the school curriculum for several years. Since 2016, lessons of this profile have been held from grades 5 to 9. They are added to the course “Social Studies”.

For the education of the smallest on the website of the Central Bank there is a section – Children about money. Here the basics are taught through fairy tales, puzzles, games..

Fundamentals of Financial Literacy

man points to a colleague

Anyone can learn to manage money properly. For this, it is not necessary to have an economist education. The main thing is to get rid of bad money habits and bring up good ones. Here are the principles that financially literate people adhere to:

Build a budget

Control of income and expenses helps to get rid of debts in time, prioritize and put free money into work. Without clear goals and a clear idea of ​​how much you earn and spend, financial stability cannot be achieved..

Save for a rainy day

“Financial airbag” is an accumulation that will help 3-6 months to live in the usual rhythm. Everyone needs a pillow. It will protect against force majeure, sudden layoffs or even natural disasters. You need to save money regularly. Financiers recommend “pay yourself” 10% of any income.

Save wisely

A 5% discount on a product that costs 20,000 rubles is more profitable than 15% on one that costs 2,000. In the first case, it’s about 1000, in the second – about 300.

But do not confuse saving with a freebie. If the product costs less than usual, this does not mean that you need it.

Put the money to work

Keeping bills under the mattress is harmful – inflation will eat them there. A bank deposit will not protect against it either, but with it capital depreciates more slowly. To increase savings, use the classic tools of the stock market. Compose a diversified portfolio of stocks, bonds, mutual funds, ETFs. Buy a currency. When investing, consider risk.

Get rid of loans

A loan is an overpayment for a product. It is justified only when this product makes a profit. For example, a car to start a business.

In Russia, a huge market for consumer loans. People are poorly versed in the payment order, miss deadlines, receive heavy fines. Often, repayment amounts are many times greater than the value of the loan issued..

Get rid of loans – the longer they hang on you, the more money you lose.

Be responsible for your future

No one will refuse a pension in old age. But do not rely on the state. Start saving on it yourself as soon as possible and invest the accumulated funds.

Learn more

Banking services, interest rates, inflation, investment instruments, economic processes, taxes – all of these issues need to be understood at least basicly. This will tell how the money “moves” in society. Get regular updates.

Top Books on Financial Literacy

adult man reads a book

George Clayson “The Richest Man in Babylon”

This is a bestseller in which the basics of financial literacy are presented in the form of Babylonian parables. The book consists of practical tips described in easy language..

Robert Kiyosaki “Rich Dad, Poor Dad”

American entrepreneur talks about, as financial thinking and upbringing in rich and poor families differ. The book is good because it uses familiar life examples, so the principles of financial literacy are quickly accepted by the reader..

Napoleon Hill “Think and Grow Rich”

Hill’s legendary book is based on the success stories of real businessmen. The author combined the material that he personally collected for more than 20 years, and deduced from them the laws of success.

Bodo Schaefer “The path to financial freedom”

This book destroys the notion that financial independence requires luggage of skills or serious start-up capital. The author says that getting rich fast is impossible. Need discipline, responsibility and sincere desire.

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