Financial literacy: Habits that change lives

03/02/2025

Amidst the dynamic and ever-changing global landscape, financial literacy has become increasingly vital. As the global economy advances, financial instruments are growing more complex, structured financial products are emerging, and digital assets, including cryptocurrencies, are gaining significant prominence.

It is evident that financially illiterate individuals occupy the least advantageous position in such a world. They lose the ability to keep up with the current situation, which negatively affects their financial well-being. Therefore, financial literacy becomes a crucial pillar of financial security and material stability—but only when it is backed by real actions and habits.

As a component of functional literacy, which, according to PISA (Programme for International Student Assessment)[https://www.oecd.org/pisa/], refers to a person’s ability to effectively navigate various life situations, financial literacy serves a broad range of functions. These functions aim not just to provide essential knowledge about finance across different domains but to ensure readiness to apply this knowledge practically in real-life circumstances.

The components of functional literacy:

Budgeting
Income and expense management
Setting and achieving financial goals
Financial planning
Investments
Debt management
Overcoming financial risks
Savings accumulation
Understanding the current financial situation
Adequate use of financial instruments
Pension accumulation
Tax management
Maintaining personal financial statements
Conscious financial behavior

Although financial literacy is a widely discussed topic, it often lacks follow-through in terms of real action, particularly on an individual level. Consider some statistics: A September 2024 study by FICO (Fair Isaac Corporation)[https://www.fico.com/] revealed that 60% of Americans view personal finance as one of the most useful subjects in school. Nearly 98% of respondents expressed interest in financial literacy education, recognizing its importance for ensuring financial well-being. About 66% believe their current financial situation could improve with better financial education. This concern is especially pronounced among economically active Gen Z individuals, 28% of whom consider themselves financially illiterate.

According to the National Financial Literacy Test, little progress was observed in the financial literacy levels of the U.S. population from 2018 to 2023. The average test score among individuals aged 19 to 51+ ranged between 71–78% (sample size: ~50,000 people). The proportion of participants who passed the test successfully was even lower, at 57.4%, indicating that over a third of participants lack adequate financial literacy. Similar results were found in another study by the FINRA (Financial Industry Regulatory Authority)[https://www.finra.org/] Investor Education Foundation, which showed that only 34% of Americans could correctly answer basic financial concept questions.

Although Americans recognize the importance of financial literacy and its potential impact on financial well-being, this awareness rarely translates into meaningful changes. However, this is not just an American issue. Similar studies worldwide reveal comparable challenges. For instance, within the European Union, 18% of the population has a low level of financial literacy, 64% have a medium level, and 18% are highly literate. These proportions vary across EU member states. EU Commissioner Mairead McGuinness emphasized the critical importance of enhancing financial literacy to ensure the population’s resilience against financial shocks.

Developing habits in financial literacy is the foundation for its gradual improvement and for maintaining progress toward financial well-being. Starting today is crucial, as the gap between theory and practice widens daily. Warren Buffett’s famous quote, “Don’t put off until tomorrow what you can do today,” underscores this urgency. Time is an ally for successful businesses but an adversary for those who remain idle—a principle equally applicable to financial literacy, which shares many elements with business and management.

However, knowledge of theory alone does not make a person financially literate. They must be able to apply this knowledge in real-life situations. As Suze Orman aptly said, “Financial freedom starts with good habits. Start small, but start today.” Habits grounded in financial literacy, combined with fundamental knowledge, form the foundation for achieving well-being.

So, what is financial literacy? It’s not just knowledge of finance or even attitudes and experience. Financial literacy is a daily, ongoing effort. To be financially literate, one must stay current with trends and developments. Its foundation lies in knowledge and awareness, followed by experience and active involvement in financial-economic processes. This involvement means taking an active, not passive, stance.

Becoming financially literate doesn’t require theoretical expertise. Studying theory can be time-consuming and ineffective without practical application. Conceptually, financial literacy has theoretical and practical levels. Learning through practice means working with habits, gradually forming them while also acquiring theoretical knowledge.

However, preconceived notions often deter people from taking practical actions or expanding their knowledge. As noted in academic literature, “A lack of knowledge about financial products, services, and technologies discourages potential consumers from utilizing available opportunities.” Distrust or fear of financial tools due to insufficient awareness is a common issue, alongside the misconception that finance is too complex or irrelevant. Another study shows that financially illiterate individuals often struggle with emotional control, prefer short-term gratification, and are more risk-prone. Avoiding complex decisions, like managing finances, inevitably leads to a lack of control over one’s situation.

Myths about financial literacy that need debunking:

Financial literacy is for the wealthy. No, it’s for anyone striving for financial stability.
Only high earners can save money. Small, consistent savings can accumulate into significant capital over time.
Investing requires professional expertise. While knowledge helps, practical experience—like using apps—can be a starting point.
Budgeting is pointless for low incomes. Planning provides a roadmap, even if adjustments are needed.
Financial literacy is about cutting enjoyment. In reality, it helps achieve more material and experiential satisfaction over time.

Even those, eager to develop financial literacy, face a fundamental question: Where to start?

Steps toward financial literacy change begins with goals and actions. Napoleon Hill said, “A goal is a dream with a deadline.” Start by setting financial goals and cultivating habits common to financially literate individuals:

Plan a budget and track income/expenses.
Build an emergency fund.
Invest or save regularly.
Compare prices and make thoughtful purchases.
Plan significant expenses.
Invest in education and personal development.
Read contracts carefully!

These habits take time to form. Begin by assessing your current financial situation, setting goals, creating a monthly budget, and starting small savings or investments. Gradually immerse yourself in these topics through books and materials. Avoid tackling everything at once—patience is key.

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Financial literacy: Habits that change lives