Conceptualising financial literacy

The term financial literacy is one that is not new. Financial literacy is perceived as important and as something to be encouraged in those who are not financially literate. These perceptions are exemplified by the existence of centres or bodies dedicated to financial literacy. These include the Financial Literacy Centre, University of Warwick, the National Endowment for Financial Education (USA), Financial Literacy Center (USA), and programmes such as the Start Right Coalition for Financial Literacy (Canada) and the Jump$tart Coalition for Personal Financial Literacy (USA). In the UK the Money Management Council is involved in a number of projects aimed at raising the financial literacy of consumers. And yet what does the term financial literacy actually mean ? What distinguishes a financially literate individual from one who is financially illiterate ? This paper explores literature examining aspects of individuals’ financial literacy in particular contexts. Use of the term literacy is also explored. Current definitions were found to be lacking (clearly having implications for the operationalisation of the concept of financial literacy). These limitations are explored and suggestions are offered towards developing an explicit conceptualisation of financial literacy.