✓ Definition of Financial Literacy, Levels, Aspects and Indicators
Definition of Financial Literacy, Levels, Aspects and Indicators – In this discussion we will explain about Financial Literacy. Which includes the definitions, levels, aspects and indicators of financial literacy with complete and easy-to-understand discussion.
Definition of Financial Literacy, Levels, Aspects and Indicators
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Definition of Financial Literacy
Financial Literacy or what is called Financial Literacy, namely the level of knowledge, skills, beliefs society relates to financial institutions as well as their products and services which are expressed in the parameters of size index.
Financial literacy is useful in encouraging the provision of an understanding of money management and opportunities to achieve a more prosperous life in the future.
And also the other benefits of financial literacy, among others, can help someone to make decisions related to activities everyday for example making decisions to save (saving) or investment (investment) to achieve the goals that have been set previously.
Definition of Financial Literacy According to Experts
The following is a definition
1. Manurung (2009:14)
The definition of financial literacy according to Manurung is a set of skills and knowledge enable an individual to make decisions and be effective with all financial resources they.
2. Mitchell
The definition of financial literacy according to Mitchell is how a person's ability to process information economics obtained and make decisions to make financial planning, financial accumulation, retirement and debt.
3. Indonesian National Strategy for Financial Literacy (2013:18)
The definition of financial literacy according to the Indonesian National Strategy for Finance is a series of processes or activities to increase knowledge (knowledge), confidence (confidence) and skills (skills) of consumers and the wider community so that they are able to manage finances more Good.
4. Kaly, Hudson and Vush (2008)
The definition of financial literacy according to Kaly, Hudson and Vush is the ability to understand financial conditions and financial concepts and to convert that knowledge appropriately into behavior.
5. OJK (Financial Services Authority, 2014)
The definition of financial literacy according to the OJK is knowledge, skills and beliefs that influence attitudes and behavior to improve the quality of decision making and financial management in order to achieve well-being.
Financial Literacy Level
FSA (2014) explains that there are levels of financial literacy that are classified into several types of levels, including:
Well literate
At this stage, someone who has knowledge and confidence about financial service institutions and also financial products or services, including features, benefits and risks, rights and obligations related to financial products and services as well as having skills in using products and services finance.
Suff literate
At this stage, a person has knowledge and beliefs about financial services institutions as well financial products and services including features, benefits and risks, rights and obligations related to products and services finance.
Less Literate
At this stage, a person only has knowledge of financial service institutions, financial products and services.
Not Literate
At this stage, a person has no knowledge and beliefs about financial service institutions and also financial products and services, and do not have skills in using products and services finance.
Aspects of Financial Literacy
Chen and Volpe states that there are aspects of financial literacy which are divided into four aspects, namely:
- Understanding of several matters related to basic knowledge of personal finance.
- Savings and borrowing (savings and loans), this includes knowledge related to savings and loans such as using a credit card.
- Insurance (insurance), this includes basic knowledge of insurance and insurance products such as life insurance and motor vehicle insurance.
- Investment (investment), this includes knowledge about market interest rates, mutual funds, and investment risks.
Meanwhile according to Nababan And Sadalian (Budiono, 2012:11) there are five aspects of financial literacy, namely:
Basic Personal Finance
Basic personal finance includes various basic understandings of a person in a financial system such as: calculation of simple interest, compound interest, inflation, opportunities, costs, time value, asset liquidity and others etc.
Money Management
Money management learn about an individual in the management of their personal money. The more understanding about financial literacy, the better the individual will be in managing their personal money.
Credit and Debt Management
Precredit management is a series of activities and components that are systematically related to one another in the process of collecting and presenting credit information for a bank.
Savings and Investments
Savings, namely the part of people's income that is not used for consumption activities, while the part Savings used for profitable economic activities (producing goods and services) are called investments (investment)
Risk Management
Risk is something that arises because of an uncertainty. The purpose of risk management is to carry out risk management so that the losses experienced can be minimized or the profits to be obtained can be maximized.
Financial Literacy Measurement Indicator
Broadly speaking, the financial literacy variable measures a person's ability to relate to an understanding of money exchange rates, service features, financial records, attitudes in spending money.
The Australian Securities and Investment Commission states, to find out how much a person's level of financial literacy can be used a benchmark or indicator of knowledge, including:
- One's knowledge of the value of goods and the scale of priorities in his life
- Budgeting, saving and how to manage money
- Credit management
- The importance of insurance and protection against risk
- Investment Basics
- Retirement planning
- The use of shopping and comparing products where to go looking for advice and information, guidance, and additional support
- How to recognize potential conflicts over usability (priority)
Thus has been explained about Definition of Financial Literacy, Levels, Aspects and Indicators, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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