By CPA Bashir Diba Abdi
Financial Literacy Improves and Strengthens the Youth
Financial literacy has been recognized as a critical factor in improving the quality of life and enhancing financial inclusion in Kenya. One of the most important roles of any business is to ensure consumers make informed financial and economic decisions that ultimately drive economic growth.
Why is financial literacy important among the youth?
We need to re-think and look at the importance of financial literacy in a broader perspective.
Being a financially illiterate youth is very dangerous. Anyone who doesn’t know how to manage their finances can unknowingly fall into various financial traps.
Financial decisions are critical bad financial decisions are hard to fix. – It can either lead to low uptake or default.
Inculcating entrepreneurial ideas at an early age will impart the youth with vital knowledge and skills that will assist them to make informed decisions when it on financial matters.
Let’s look at why this financial knowledge is important to our young people:
- They will make informed decisions
Information is power, with financial information you are in a better position to make wise decisions especially when it comes to which products suits your needs.
- Financial Illiteracy breed irresponsible adults
Research shows that financial illiteracy is a recipe for poor credit scores. quite a good number of financial illiterate youth will definitely end up as irresponsible adult particularly when it comes to financial matter. They will have problems in saving and investing thus ending up having poor credit scores.
- Discourages youth from picking up bad financial habits
Without financial knowledge young people will be involved in poor money habits such as gambling and antisocial acts.
- Financial literacy help youths address emergency
An emergency is an urgent, sudden, and serious event or an unforeseen change in circumstances that necessitates immediate action. Sometimes youth are caught up in urgent situations that require large amounts of money. For a young person who is financially literate, it becomes a little easier to mitigate this emergency in terms of financial savings unlike one who is financially illiterate.
In other words, financial literacy is important for our youth. This concept will in the long run help the youth to understand how to save, invest, budget and manage debts. Failure to do so can lead to a generation that’s not only irresponsible but also poor.
How can we achieve financial literacy? Roadmap of actions:
To achieve financial literacy objectives, we need to look at how the youths can be brought on board. With the sole purpose of equipping them with financial knowledge, skills and confidence to manage money well.
First and foremost, the youth form a big percentage our population, to achieve this goal it’s important to
a) Improve the ability of the youth to manage their money
b) Financial illiteracy is not only detrimental to the youth only but the economy at large, its therefore important to equip the youth with knowledge and skills to protect themselves against risks and fraud in the face of free economy and vast online loans
c) On the other hand, all stakeholders are duty bound to improve institutional cooperation and promote a level playing ground. This will have a ripple effect in strengthening mobilization and cost-effective use of resources to promote financial literacy.
d) The government has a role to broaden the diversity and quality of initiatives that drive inclusion of financial knowledge in school curriculums.
e) To realize the benefit of financial literacy it’s important to set in motion a process of increased self-awareness, skill development, and appropriate change of attitude for individuals to strengthen positive mindsets towards money generation and management.
f) We need to conduct research and strengthen monitoring & evaluation of financial literacy initiatives from time to time.
g) We need to borrow best practices in terms of financial literacy programs and build on it to suit the needs of our youth.
Expected benefits from strengthening financial literacy
Financial literacy improves and strengthens the youth in the following ways:
•. Our youths will be able to make ends meet (i.e., income) and spend consistently not exceeding the limit.
• One is in a position to keep track of his finances from time to time
• Making financial provisions for future use
• Making sound and informed choices about financial products.
• Equipped with the financial knowledge it Improves youths understanding and exercising of their rights as regards to their treatment by financial institutions, adherence to rules and regulation and being responsive.
• When financial literacy is embraced it brings on board the youth and increases their levels of financial inclusion.
• Wise financial decision definitely leads to increased levels of personal savings.
• It’s also lower levels of over-indebtedness and address dependence syndrome.
•Gradually the youth can increase their investment and invest at the capital markets.
• The rate of default will be minimal and fewer youth will fall victim to financial frauds and scams.
• Many young people are willing to take financial loans, so financial institutions will have to offer products and services which are more competitively priced and custom tailored to meet the needs of youth’s groups.
Can financial literacy address youth unemployment?
According to the Kenya Bureau of statistics, Kenya’s youth unemployment rate stands at 65%, which is among the highest in the world. Unfortunately the majority of youth in this bracket are engaged in the informal sector, which is largely unregulated. Besides, they are subjected to low earnings and long working hours, without any formal contract and rampant violation of labour laws.
This scenario paints a bleak picture of suffering under a slow-growing economy.
To address the pressing issue of unemployment which is not only a concern today but cast dark cloud over the socio-economic future of Kenya.
This mammoth task calls for innovative and collaborative solutions, one of the quick-fix solutions that needs to be embraced is the pooling of resources by various stakeholders to drive and inculcate awareness about financial literacy.
Basically, by equipping our youth with the financial knowledge and skills to navigate through these difficult economic times, we will provide them with tools that will not only enable them to attain financial independence but also inspire a spirit of entrepreneurship and drive long-term economic inclusion and growth.
Tackling from the front
Financial inclusion is a process that requires concerted efforts from all stakeholders both in the public and private sector. This collaboration is a cornerstone of meaningful mitigation in addressing youth unemployment.
Among its flagship initiatives is; “The Kenya Kwanza Government campaigned on the platform of Bottom-up Economics, with a view of improving the livelihood of millions of Kenyans. This Bottom-up Economics is about investing the limited capital available where it will create the most jobs at the bottom of the pyramid -the main target in this strand among others is the youth who form the bulk of the unemployed segment in Kenya.
To be precise any investment is taking a risk. By making informed decisions the youth can maneuver around risks while engaging in available opportunities and not only cultivate financial knowledge but also encourage strategic thinking and risk assessment skills.
The Kenya kwanza initiative is timely and welcomed as it tackles the unemployment crisis. The bottom-up economic initiative has a human face as it is a youth-focused initiative and friendly. This initiative is a wake-up call for other players to think outside the box by creating an ecosystem that promotes financial literacy, and nurtures a savings and investments culture that will ultimately drive Kenya’s economic growth and prosperity.
Tangible Solutions is the way to go
First, we need to embrace financial literacy, own it and practice it. In order for us to reap the benefits of financial literacy we need to address the hiccups and challenges impending us to realize this. This can only be achieved by fostering a conducive environment where all the government bodies, corporates, educational institutions and non-profit organizations can pool their resources and expertise. Such powerful collaborations are in their diversity, brings together different youth driven approaches, skills and tools to develop a holistic and impactful initiatives that will benefit today’s youth and future generations.
It’s worth noting that Kenya is not operating in a vacuum, given the digital age we are in today, technology plays a pivotal role in dissemination and knowledge sharing. Digital resources can widely expand the reach of financial literacy efforts, overcoming geographical and logistical barriers across Kenya.
It is necessary to develop tangible solutions as a way out. This stakeholder’s engagement is crucial because such networking efforts could form a bridge that goes beyond addressing economic exclusion of the vulnerable segment of our society, but also shaping a financially empowered generation.
This youth driven approach can be harnessed through such engagements in order to unlock the potential of our youth, by ensuring they are willing to change their financial behaviors and embrace financial literacy as the sole tools that can address their current predicament.
We need to up our game and adopt best practices as far as financial literacy is concerned. Financial literacy should form part of our collective agenda, we can bank on the concept of financial literacy and emphasise that every youth in Kenya has at least the knowledge to make informed financial decisions and an opportunity to shape their own economic future. As we face the challenges of youth unemployment head-on and with the good will from the Kenya Kwanza government the issues of unemployment will be addressed to a great length. The Hustler fund approach will be not only be a solution but a beacon of hope for our nation’s future.
CPA Bashir Diba Abdi is a certified accountant experienced in public finance/Auditing.
Email: [email protected]