Why is financial literacy important in preventing personal and national financial crises?
Answer (1)
Financial literacy means understanding how money works—how to save, spend, borrow, and invest wisely. It is important not just for individuals but for the whole country. When people and leaders lack financial knowledge, they can make bad decisions that lead to personal debt, business failure, or even national crises.On a personal level, financial literacy helps students, workers, and families manage their budgets. For example, someone who understands how interest works is less likely to fall into the trap of high-interest loans or credit card debt. During the COVID-19 pandemic, many Filipinos with savings or emergency funds were better prepared when jobs were lost or businesses had to close. Those who had no financial plan suffered more.In terms of business, financial literacy helps entrepreneurs understand cash flow, loans, and investment risks. A small sari-sari store owner who knows how to track profit and expenses can avoid overspending or borrowing too much. Multiply this across thousands of small businesses, and you see how financial literacy supports the economy.At the national level, leaders and policy makers must also be financially literate. If governments take on too much debt or approve risky economic policies, the whole country can face problems—like what happened during the 1997 Asian Financial Crisis. Some countries borrowed heavily without preparing for emergencies, and their economies collapsed when trouble came.Schools in the Philippines are now starting to include financial education in senior high school. This is a good step. Students who learn about budgeting, saving, and investing early are more likely to become responsible adults who help strengthen the economy.In conclusion, financial literacy is a life skill. It empowers individuals, protects families, and supports a strong, stable country. A financially literate population is less likely to panic during a crisis—and more likely to recover quickly.
