The Difference between Financial Education, Financial Literacy and Business Education

Does the terms financial education, financial literacy and business education mean the same thing?

There is a common misconception within the society that the three terms mean the same thing. Despite their proximity in concepts, they have different meanings. For instance, one can only have financial literacy by first acquiring financial education. Business education on the other hand is the technical knowledge relating to finance and finances that is often taught in educational institutions.

A funny thing to note is that one can learn business education and still lack the necessary financial education that will make them financially literate. It is due to this reason that you will find many graduates from business courses who make poor financial decisions simply because they are not financially literate.

Highlights

       i.          What is Financial Education Program?

      ii.          What is financial education on an individual level?

     iii.          What is financial education on an institutional level?

    iv.          What is financial education on a market level?

      v.          Why Everyone Should Have Financial Education

Financial Education Explained

According to a report provided by the Financial Sector Deepening (FSD), “financial education program is an initiative that teaches the knowledge, skills and attitudes that people can employ to adopt good money management practices for earning, spending, saving, borrowing and investing”.

Many people often mistaken or rather misunderstand financial education to business education. The two terms are utterly different. Due to this misunderstanding, it is important to understand that financial education has nothing to do with business development service; a concept of business education.

Financial education is not a program that teaches people on how to craft a business plan or how to run a business. It does not also delve in other business education concepts such as pricing, costing or even record keeping.

Moreover, the term financial education should not be mistaken for financial literacy. It is through financial education that financial literacy is developed. It majorly focuses on a wide range of basic financial skills that aids a person in making decisions regarding money.

Individual Financial Education

On a personal level, financial education develops the necessary literacy required for households to use scarce resources more effectively or rather economically. Additionally, it helps the pick the best financial products and services that meet their needs.

It can thus be asserted that the financial literacy acquired from financial education makes people change from being reactive decision makers to being proactive decision makers.

Institutional Financial Education

For financial institutions, the acquisition of financial education helps them to have an edge in meeting the demands of their clients, gain a competitive advantage over their rivals.

It also supports informed consumers and improves their standing as good corporate citizens. Therefore, it can be asserted that having financial education is a good thing for both the consumers/clients and the financial institutions.

Market Level Financial Education

On a market level, informed consumers play a monitoring role in the market, weeding out bad practices and providers. Informed clients are better able to put pressure on financial institutions for appropriately priced and transparent services.

Why Everyone Should Have Financial Education

The reason as to why I say financial education and literacy is a good thing for both the customers and financial institutions is based on the fact that financially literate consumers always make better customers and in turn they represent reduced risk for financial institutions thus a win-win for both.