Moneywise: Transforming the GCC region through financial literacy

Financial literacy has become one of the most essential kinds of learning in a world that is full of uncertainties. Equipping a person with the ability to understand and effectively manage personal finances can empower them with the insight to make the right financial decisions – and the earlier, the better.

The 2020 OECD International Survey of Adult Financial Literacy revealed that only 61 per cent of respondents from 26 countries in Asia, Europe, and Latin America – including 12 OECD members – possessed the minimal financial knowledge necessary.

Furthermore, the survey disclosed that only 28 per cent of adults had enough savings to sustain themselves for only one week in case of job loss. Furthermore, Standard & Poor’s Global Finlit Survey highlights that financial illiteracy mainly affects women and young people.

These statistics underscore the importance of instilling the age-old wisdom of ‘starting early’ in educating young people, as it can positively influence their attitudes and behaviours when it comes to financial planning for a brighter future.

Financial literacy in the ‘digital age’

Teenagers today face the unique task of balancing the real-world consequences of spending money via digital services, and their dependence on digital services is only set to grow. Parents and educators need to navigate this tricky scenario smartly and teach young ones the tangible value of money to help them build a solid financial foundation.

The focus should be on helping them avoid the common financial pitfall of overspending with ‘plastic money’ (credit or debit cards) and increasing their debt.

Though budgeting is a fundamental step in managing finances, the preparation process goes beyond teaching students the basics of saving. Key will be recognising the unique circumstances of the digital age and utilising innovative approaches to financial education.

As youngsters are already accustomed to apps, there is merit in introducing them to cutting-edge digital budgeting apps, which will allow them to track and control their spending habits.

Most digital banking propositions are now designed to give teens and young adults independence over their spending, provide access to a debit card, and the ability to transact via mobile applications. Mobile apps also have unique options to create financial goals and save towards them – encouraging the next generation to be smart with their money.

Learning for the long-haul

Most parents strive to teach their children the art of prioritising savings, a habit that will hold them in good stead when they begin earning their own money. For this, it is important to instil a sense of financial security and discipline for both emergencies and long-term goals.

Introducing them to the world of investing from a young age will help them understand how to grow their wealth responsibly. Providing a hands-on experience through custodial accounts or family investment plans can foster an interest in long-term wealth creation and help teenagers develop a solid financial foundation.

Though it may seem too premature to introduce young ones to concepts such as retirement planning and insurance coverage, doing so will help them develop a clear vision of their financial future and foster a proactive approach to personal finance.

Educating them about the significance of good credit scores, responsible credit card use, and prompt bill payments can help them build a strong credit history for their future.

Furthermore, you can also make use of real-life situations to teach valuable financial lessons. Why not involve them in family budget discussions? Encourage them to participate in household financial decision-making or set up a system for them to earn and manage their own money.

These practical experiences will help solidify financial concepts and prepare teens for the challenges they will face as they enter adulthood.

A strong financial foundation for tech-savvy youngsters  

Acknowledging the significance of empowering young individuals and preparing them for a financially secure future, several government initiatives, exemplified by the Abu Dhabi Family Wellbeing Strategy, in tandem with initiatives from numerous financial institutions, have made youth financial literacy a top priority.

This collaborative endeavour between the public and private sectors represents a crucial milestone in ensuring that the youth not only gain essential financial knowledge but also, through practising financial responsibility, contribute to a positive economic impact.

Harnessing the potential of secure digital payment systems, understanding the importance of online banking security measures to safeguard financial information, and exploring the opportunities and risks associated with digital investing are some of the key components of financial literacy.

With financial literacy, children can build a foundation for achieving goals such as purchasing their first home or even paying for their own higher education.

Empowering tech-savvy teens with the skills and knowledge of personal finance can contribute to a more financially responsible and secure future for the  ‘digital generation’.

The author is executive VP, head of NEO & Personal Banking at Mashreq. 

Read: Top savings accounts for kids and teens in the UAE