What are the consequences of a lack of financial education?
-
Loading... - Ali Zambrano
- 21 Mar 2022
- 400 Views
- 0 Like
- 0 Comment
Although financial education is fundamental in the life of any person, the reality is that it is an area that, in general, is not studied in schools or universities, unless it is in careers that are related to the financial sector. theme.
According to a study carried out by Standard and Poor's, on average, 30% of adults in Latin America have financial education . In the case of Ecuador, the percentage does not exceed 25%.
According to the Organization for Economic Co-operation and Development (OECD), financial education is "a process in which consumers and investors improve their understanding of financial products, concepts and risks in order to develop the skills and confidence to make informed decisions that improve their economic well-being.
In other words, the lack of financial education means that not only can basic savings and investment decisions not be made, due to gaps in concepts such as the value of money over time, what is an interest rate , what is a budget , among others.
In this context, people can be victims of loans with abusive interest rates and can even make use of informal or chulco loans . They can also become over-indebted or fall for fraud and scams of all kinds.
The main consequences of a lack of financial education are:
1.- It is more difficult to assess financial risks and opportunities . This makes financial decisions more risky and potentially damaging.
2.- It puts anyone looking to be financially secure at a disadvantage, as they will not know if they are making the right financial decisions and may increase the chances of loss due to fraud or scams. On average, up to 30% of annual revenue can be lost due to poor decisions based on ignorance.
3.- It can lead to having large amounts of debt , because if you do not know how to compare interest rates , you cannot choose the credits that are most favorable to you, nor decide when it is good and when it is not good to borrow.
4.- Magnifies the mental problems associated with debt and reduces the chances of finding an adequate solution to get out of them. In other words, it increases the chances of financial stress by more than 80% .
5.- It can lead people to resort to informal loans, or chulco , which are not only detrimental to their financial health , since they have high interest rates , but can also put them in danger.
6.- If you do not have a budget, it is very likely that you will spend more than you earn and have to borrow, which leads you to be in a spiral of debt.
7.- People do not have the resources to deal with an emergency or unforeseen event.
8.- Income during retirement or retirement is up to 60% lower because no savings or investment mechanism was implemented during active working life, thinking about the future.
What can you do?
Start educating yourself. Today, there are endless free materials you can get online. There are portals that explain the most important terminology to you; There are also Podcasts, Videos on Youtube, books and all kinds of material with which you can start educating yourself financially . Read More...
