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Secure families are better able to contribute to vital, thriving communities, further fostering community economic development.
Over the last several years, the issue of financial literacy seems to have risen on the agendas of educators, community groups, businesses, government agencies, organizations, and policy makers-- everyone is talking about it. And it's not just happening in the United States-the United Kingdom and Japan both have substantial initiatives targeted toward financial literacy (see, for example, Adult Financial Literacy Advisory Group, 2000).
Professionals in the field of family and consumer sciences, many of whom have been dealing with financial education for the past decades, may be wondering why so many people have suddenly "discovered" that financial competencies are important to families and households. The goal of this paper is to shed some light on the financial literacy issues that are being discussed, both within and outside of the field: How are people defining "financial literacy?" Why is it "suddenly" so important? What evidence is there that lack of financial literacy is a problem? What financial literacy initiatives are underway? Are they working-and how do we know? Finally, what roles can family and consumer sciences professionals play?
WHAT IS FINANCIAL LITERACY?
Financial literacy means different things to different people. For some it is quite broad, encompassing an understanding of economics and how household decisions are affected by economic conditions and circumstances. For others, it focuses quite narrowly on basic money management-budgeting, saving, investing, and insuring. Still others include a set of consumer and "buy-- manship" skills within a financial literacy framework. In reality, financial literacy probably can and does include all of these topics.
In 1992, Britain's National Foundation for Educational Research defined financial literacy as "the ability to make informed judgements and to take effective decisions regarding the use and management of money" (NFCL, 2001). Garman and Forgue use the term financial literacy to refer to knowing the facts and vocabulary necessary to manage one's personal finances successfully (Garman & Forgue, 2000, p. 2). Vitt et al. defined personal financial literacy as "the ability to read, analyze, manage, and communicate about the personal financial conditions that affect material well being. It includes the ability to discern financial choices, discuss money and financial issues without (or despite) discomfort,...