FINANCIAL LITERACY, ILLITERACY and PERSONAL FINANCIAL MANAGEMENT

Am privileged to have my ‘shosh’ alive. She is now over 90 years old. Lively and energetic. We usually have our granny-son moments when she narrates to me about life in the 1930’s. when bread cost 10 cents, unga wa ngano 50cents and the monthly salary about 20 bob; enough to feed the whole family, save and invest amicably. We also discuss modern economy; to the best of her knowledge.
Shosh’ amazes me! She is one lady who will just sit down beside the road and sell avacadoes, bananas or some other stuff. She never earns a loss. Infact, she earns profits enough for her upkeep. She never did accounting or finance! To her,accounting is vision 2030. Unfortunately, by then she will be dead,sorry to say. She cant debit or credit any transaction formally in accounting records. But the point is she does make profits.
Basically, accounting is a standard method of recording and reporting business activities. It may also involve book-keeping. Shosh does her accounting in her own way,a simplified way. I usually find it difficult to explain basic accounting and financial concepts and  principles to her. For instance, how on hell can she  get to understand the ‘NSE All Share Index(NASI), the NSE20 share index, market capitalization and all that other business jargon!! She has debts! But how can she understand that we pay our debts as late as possible and collect our money as early as possible?
I wish to classify people into 2: FINANCIALLY LITERATE AND FINANCIALLY ILLITERATE. By financial illiteracy, I don’t mean you never went to class. No! Rather, I mean guys whose profession is not money related; who have never been to a formal business class. These business courses am referring to include CPA, ACCA, B.com, Economics, Finance and other related courses.
A research have been doing reveals that there exist a significant difference in fund management for the 2 categories above.(NB. Study is done to respondents in the same industry, same age group and fairly equal salaries but different professional background to avoid bias). Whether literate or not, someone need to make decisions on different issues. Some critical decisions to be made include: SAVING, PENSION SCHEMES, BUYING(price comparison), INVESTING, DEBT MANAGEMENT and MAINTENANCE OF EMERGENCY FUND.
Financially literate people generally manage their funds better in the case of the above aspects except in debt management(repayment). This is justifiable! They say…’ pay your debts as late as possible and collect our money as early as possible’. They understand very well that paying debts early is opportunity cost to investing…they would rather hold such debt a little longer to speculate investment opportunities.
People have increasing to take individual responsibility for their financial affairs unlike in the past when the governments provided basic necessities like education, provision of heath care and even subsidized food prices. This calls for skills that can be obtained through financial education. The cost of education, in Kenya for example, even though the government introduced free primary and secondary education, the reality is that the parents still bear the burden of most requirements.
Financial problems resulting from poor personal financial management is known to affect individual productivity at the workplace. Over-indebtedness, overspending, unwise use of credit, bad spending decisions, poor money management and inadequate money to make ends meet are problems often related to financial illitarecy. financial education aimed at equipping people with personal financial management skills is very crucial.
Financial Literacy is the ability to make informed judgments and to take effective actions regarding the current and future use and management of money. Financial literacy includes the ability to understand financial choices. For example, the ability to compare offers before applying for a credit card, having a current and savings accounts, having a book keeping system, planning for the future like saving or investing for long term goals like education, home, vacation etc. Financial literacy also calls for wise spending. This means preparing budgets, tracking expenditures etc. Financial literacy affects financial decision making. Ignorance about basic financial concepts can be linked to lack of retirement planning, lack of participation in the stock market, and poor borrowing behavior.
Bottom line; the first step in good fund management is equipping yourself with basic financial education, whether formal or informal, it doesn’t matter.