Financial literacy is the ability to understand and effectively manage essential financial concepts such as budgeting, investing, borrowing, taxation and personal finance management. This foundational knowledge empowers individuals to navigate their finances successfully and reduces the likelihood of encountering serious financial crises. In our modern world, where daily financial decisions involve budgets, mortgages, loans, and advanced financial technologies, financial literacy is more crucial than ever.
According to the Financial Industry Regulatory Authority (FINRA), approximately 66% of Americans are considered financially illiterate. The European Commission’s Eurobarometer survey on financial literacy, published in July 2023, reveals that only 18% of EU citizens have a high level of financial literacy. In contrast, 64% possess a medium level, and 18% have a low level of financial literacy. Significant disparities exist among member states, with countries like the Netherlands, Denmark, and Finland showing notably high levels of literacy. Croatia falls in the middle of the spectrum among the surveyed nations.
In the EU, nearly 90% of respondents agree that they evaluate their financial ability before making purchases, monitor their spending and set long-term financial goals. The survey also highlights the need for targeted financial education for specific groups, including women, young people, lower-income individuals, and those with lower educational attainment.
While Serbia was not included in these studies, it is likely that financial literacy levels in the country are relatively low. In Serbia, educational institutions offer specialized financial literacy programs and courses, but such education is not yet a compulsory part of the school curriculum.
For entrepreneurs, particularly those starting new businesses, having a solid grasp of financial principles is essential. This includes understanding credit ratings, structuring sources of financing, and attracting investors. Mentorship, budget planning, and an understanding of financial flows are critical to entrepreneurial success.
Female entrepreneurs face additional hurdles, such as societal norms, limited access to finance, and “imposter” syndrome. Data indicates that women represent about 31% of entrepreneurial ventures in Serbia, with 70% being new entrepreneurs. Challenges include inadequate financial knowledge and difficulties in securing initial capital.
Financial literacy should be cultivated from an early age. Educational initiatives could include integrating basic financial concepts, budgeting, saving, and investing into the curriculum. Parents also play a vital role in teaching children about managing money, emphasizing the importance of responsibility and discipline through various activities like part-time jobs and managing a bank account.
In conclusion, financial literacy is a critical skill that affects all areas of life. It helps individuals understand financial flows and manage business operations effectively, contributing to personal and communal success and stability.
