FinCap Reads: Essential Ideas for Building a Financially Capable Generation
“Poverty is not just a lack of money; it is not having the capability to realize one’s full potential as a human being.”
Last year JA launched a new effort, JA Building a Financially Capable Generation, that aims to cultivate the attitudes and behaviors that young people need to become financially capable. In partnership with HSBC, JA set out to create, test, and scale a learning experience that empowers young people to own their financial future.
If this sounds familiar, maybe that’s because JA has been teaching financial literacy for 100 years. Along with work readiness and entrepreneurship, it is one of JA’s foundational pillars for preparing young people to build thriving communities. Literacy is not an end in itself, it is a step toward confidence and capability. Just as we teach young people to read so they can write, we must enable young people to put elemental financial knowledge and skills to use.
Following are a selection of articles, reports, and perspectives that offer context, insights, and inspiration and answer common questions about financial capability.
What is financial capability?
When we began to develop a new learning experience focused on financial capability, we talked to Dr. Guy Stuart at Microfinance Opportunities. In a blog post, From Financial Literacy to Financial Capabilities: Implications for Practitioners, Dr. Stuart grounds “financial capability” in the capabilities approach of economist, philosopher, and Nobel Laureate Amartya Sen. In a subsequent post, What is Financial Capability?, he defines the term and differentiates it from financial literacy.
What does financial capability have to do with financial inclusion and sustainable development?
“Financial services can help drive development. They help people escape poverty by facilitating investments in their health, education, and businesses. And they make it easier to manage financial emergencies—such as a job loss or crop failure—that can push families into destitution. Many poor people around the world lack the financial services that can serve these functions, such as bank accounts and digital payments. Instead, they rely on cash—which can be unsafe and hard to manage.”
To ensure financial inclusion, you must also be financially capable. Financial inclusion aims to expand access for all to the basic financial services people need to protect themselves against hardship and invest in their futures. Whether it’s managing a budget or opening a savings account, making and receiving digital payments, or accessing credit, young people must be equipped to make smart financial decisions and take action in their best interest. The World Bank’s Global Findex Database provides measures of how we are doing from an inclusion point of view. It includes detailed insight into how adults in more than 140 economies access accounts, make payments, save, borrow, and manage risk.
What does financial capability have to do with social justice?
Teaching Finance as an Act of Social Justice, a blog post by Pockets Change, connects financial education and financial wellness with overall well-being, equity, and social mobility. Pockets Change builds financial resilience through Hip Hop pedagogy. The post appears on One Day, a blog by Teach for America.
What is financial wellness?
Teaching financial capability to youth enables their lifelong financial health and wellness. What exactly is “financial health?” Measuring Financial Health around the Globe, a report from Innovations for Poverty Action, helps answer that question.
What does financial capability have to do with gender equality?
“Digital financial services have expanded opportunities for millions of women across the globe. More than 240 million more women now have an account with a financial institution or mobile money service, compared to 2014. Through this increased engagement in the formal economy, women’s resilience to financial, economic and health shocks is improving. However, there remains much work to do to achieve gender equality in financial services. Approximately one billion women do not have formal financial services, due to persistent barriers in access to identification documents, mobile phones, digital skills, financial capability, as well as inappropriate products and more.”
Read more in Advancing Women’s Digital Financial Inclusion, a report published by the Global Partnership for Financial Inclusion and endorsed by G20 finance ministers. For more on financial inclusion and gender equality, check out The gender gap in financial inclusion won’t budge. Here are three ways to shrink it via the World Bank Blog and Gender equality could unlock USD12 trillion of incremental GDP in 2025 through financial and digital inclusion via the Alliance for Financial Inclusion via the Alliance for Financial Inclusion.
What exactly do we need to teach children and youth so that they become financially capable?
The Alliance for Financial Inclusion (AFI) published a Financial Competency Framework for children and youth. Developed by AFI’s Eastern Europe and Central Asia Policy Initiative along with the Central Bank of Armenia, the framework is based on four competency categories of financial capability (knowledge, skills, attitude, and behavior) and seven thematic areas (economy, budgeting, saving and planning, debt management, shopping around, rights protection, security) across four age groups of school children and youth (up to 10 years of age, 11-12 years old, 13-15 years old and 16-18 years old).
Why does financial capability matter right now?
“The COVID-19 outbreak has shed new light on the need to ensure the financial resilience of individuals and households and on policy measures to enhance preparedness against negative financial shocks. This paper focuses on the financial issues facing individuals, households and micro-enterprises in Asia as a result of the ongoing COVID-19 pandemic, and the policy responses that have been developed to mitigate the risks and support financial resilience.”
Read more via a new report by the OECD titled Financial consumer protection and financial literacy in Asia in response to COVID-19. JA Worldwide and HSBC published a blog post, Financial Capability and Economic Resilience: What Global Youth Need Now, on Good Company, JA’s thought leadership magazine, connecting financial capability with economic resilience and recovery. Another report, Mitigating the Impact of COVID-19 on Gains in Financial Inclusion: Early lessons from regulators and policymakers, by the Alliance for Financial Inclusion, points to timely lessons and opportunities to further guide recovery.