Financial Literacy for Young Adults

Financial literacy refers to the set of skills, knowledge and capabilities that allows an individual to make informed and effective decisions with their financial resources.  Throughout our lives we have to go through the cycle of earning, saving, spending, borrowing and investing money.  However, many lack the knowledge and strategy to maximize their financial decisions.  A study carried out by the Nigeria Deposit Insurance Company (NDIC) with an aim to assessing the knowledge of Nigerians with respect to financial literacy identified many inadequacies.  Over 50% of respondents actually admitted to not tracking their expenses at all.
Given the knowledge gap and lackadaisical attitude that exists towards money management and financial planning, there is a great need to develop the necessary skills and knowledge at an early age.  Against this background, it is important that schools start teaching financial literacy for the benefit of our economic future. This will prepare the youth to successfully transit from the safety of their parent’s homes to the real world economy.
Financial literacy is more than just being able to open a bank account or acquiring a credit card.  It is at the heart of our economic future and long-term security; it includes skills such as financial action planning for the future, and the discipline to use those skills to make sound and informed financial decisions every day.  Ensuring that the youth become financially capable is now widely seen as a necessary ingredient in building our economic future and stability. 
The financial literacy thought in schools should develop competencies in areas such as budgeting, loans, mortgages, credit-card spending and retirement savings.  This makes sense because parents generally don’t find talking about money great fun; hence they shy away from it.  Some parents don’t even possess sound financial literacy themselves to be able to pass the message across to their wards.  Financial literacy can be fun for parents and teachers alike if a question or case study based approach is adopted.  For example; do I want to spend money to have what someone else has without thinking of the personal financial implications?  Why do I need a monthly budget when I can make a mental note of my expenditure? A credit card is just free money, so why do I need to manage my spending?
The method adopted in passing the financial literacy message across is vital, and as a society we have an obligation to prepare our children to make wise and informed decisions in this modern world.  Sound financial literacy goes beyond just advising them to “save money for the rainy day”.  The financial world has become more sophisticated and complex today than it has ever been and the youth need to know early enough that a credit card is not actually free money, but one of the most expensive ways to borrow money.  If not used correctly it may end up being an albatross for the individual and can lead to excessive debt.
Teaching financial education in schools will enable the youth to build the knowledge, skills and confidence that they need to be able to manage their money effectively.  Looking back, many of the older people today will admit that if they had possessed the skills necessary to manage their personal finances earlier in life, it would have encouraged them to aspire to greater goals and achieve more.
Some of the disadvantages of not acquiring financial literacy early on in life are that the individual may be susceptible to fraud or not even see the relevance of saving for retirement.  Financially educated consumers actually help financial markets operate more efficiently and building financially capable populations has massive future benefits for the economy. 
A starting point would be to have a financial action plan and do a simple monthly budget of your income and expenditure.  This simple technique can provide lots of insight into your financial well being.  There are many resources available on the internet to manage personal finance including budgeting tools and savings calculator.  In conclusion, Warren Buffet the renowned American investor said that we shouldn’t save what is left after spending; we should spend what is left after saving. 
This advice sounds very simple, but having the discipline and presence of mind to adhere to it in our everyday lives is difficult.  However, a strong background in financial literacy will prepare the coming generation for the financial realities that await them and prevent them from the burden of excessive debt.
Written by Kayode Yusuf
Columnist and Financial Consultant


  1. Educational and Challenging. I have successfully learned something from this.

  2. You are not alone David. I learnt something from this one too.

  3. A very interesting & eye opening read. A culture that we need to imbibe indeed. Unfortunately, things seem to be getting worse rather than better. We have so much information around us for appropriate exposure & wise choices instead we tilt towards more debt & foolish expenses from these exposures/technological advancement. The average youth today is more concerned about owning an iphone5 or Samsung S4 than planning for his/her future.

  4. Funmi the truth is most people forget that 'youth' is only a phase of life and like everything else it doesnt last forever

  5. I admit that there are lots of information that will enable one make much more sound choices concerning their finances but i don't think enhancing financial literacy should be that much of a pressing concern for now...after all,not a lot of Nigerians have access to financial institutions in Nigeria..after all,a recent survey by the CBN puts Financial Inclusion in Nigeria at just over 50%....The average Nigerian is more concerned about having enough to eat than making sound financial Nigeria is hardly a place where plans in ones lives are actually that one is more concerned about owning an Iphone or a Samsung galaxy S4,i think shouldn't be that much of a concern to you.....Maybe he or she gets much higher payoff striving to own that than undertaking a plan that might not eventually work out anyway...

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